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Hedge Funds return to winning ways with 1.68 per cent gain in October
The hedge fund industry shook off September’s swoon in October, posting a 1.68 per cent return for the month, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions.
By comparison, the S&P 500 Total Return Index gained 7.01 per cent in October.
For the year to date, the hedge fund industry was up 10.60 per cent through October. The S&P 500 Total Return Index was up 24.04 per cent over the same period.
Undaunted by the previous month’s far-flung red ink, nearly all Hedge Fund subsectors did an about-face in October. The industry’s return to gains was led by the Technology Index which was up +4.39 per cent, followed closely by the Distressed Securities Index, up +4.14 per cent and the Emerging Markets Asian Equities Index which advanced +3.84 per cent. Other sub-sectors gaining ground in October included the Equity Long Bias Index, returning +3.02 per cent, the Emerging Markets Sub Saharan Africa Index, up +2.99 per cent, and Option Strategies Index, at +2.16 per cent.
As for the sectors unable to shake off the September slump, they were led by Latin American indices including the Emerging Markets Latin American Equities Index -5.51 per cent and the Emerging Markets Latin America Index -3.96 per cent. Elsewhere the Fixed Income Arbitrage Index retreated -2.07 per cent, the Emerging Markets Global Fixed Income Index lost -1.05 per cent, and the Emerging Markets MENA Index fell -0.51 per cent.
For the year-to-date interval, nearly all sub-sectors are in the black through October. The Emerging Markets Eastern European Equities Index has had a banner year and leads all Hedge Fund subsectors, up +25.91 per cent. The Distressed Securities Index is nevertheless nipping at its heels, posting compound returns of +24.09 per cent year-to-date. Following at a decent distance in third position is the Equity Long Bias Index which is up +17.61 per cent through October.
Other notable year-to-date gainers included the Technology Index, up +16.27 per cent, the European Equities Index, advancing +15.42 per cent, and the Emerging Markets MENA Index, gaining +14.28 per cent.
Only a handful of subsectors have seen year-to-date losses. Woes continued unabated for the Emerging Markets Latin American Equities Index, which has lost -12.21 per cent so far this year, as well as for the Emerging Markets Latin America Index, which has shed -7.05 per cent. The Emerging Markets Global Fixed Income Index and the Fixed Income Arbitrage Index are on the bubble — down -0.48 per cent and -0.18 per cent respectively.
“US equity markets enjoyed their best month of the year in October, and hedge funds benefitted,” says Ben Crawford, Head of Research at Barclay Hedge. “While labour and supply chain issues dragged economies in the US and elsewhere, most hedge fund sectors appeared unaffected, notching October as another victory in a year already full of them.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Results & performance FundsIntegral reports client average daily volumes of USD50.5bn in October 2021
Integral, a technology company in the foreign exchange market, has reported average daily volumes (ADV) across Integral platforms totalled USD50.5 billion in October 2021.
This represents an increase of +12.5 per cent compared to September 2021 and an increase of +15.3 per cent compared to the same period in 2020.
Integral’s global trading network has been designed to meet the trading needs of the widest variety of buy-side FX market participants, including banks, brokers, asset managers, and hedge funds. Its clients leverage the deep and diverse FX liquidity available through our platforms within an integrated environment.
Like this article? Sign up to our free newsletter Author Profile Related Topics Results & performanceManagers and investors split on ESG integration, with data clarity a major roadblock
Fund managers and investors remain split over how they integrate environmental, social and governance (ESG) factors into their risk and investment processes, with industry participants citing a lack of clarity over data reliability, comparability and standardisation as the main challenge.
Alternatives-focused software-as-a-service and data management firm Vidrio Financial, in partnership with boutique advisory firm Close Group Consulting, polled a broad range of fund managers and institutional investors on how they are integrating ESG strategies into their overall investment process, and explored some of the data and structural challenges they face.
The latest ‘Vidrio Views’ survey – which was carried out ahead of the United Nations’ COP26 climate change summit in Glasgow – found that the challenge of ESG data comparability and reliability remains the primary roadblock when it comes to firms integrating ESG investment practices.
Specifically, some 42 per cent pinpointed ESG data challenges on comparability as the key barrier, while 25 per cent of those quizzed cited confusion over what constitutes best practice as the primary roadblock. Meanwhile, a further 16 per cent of respondents believe that calculating ESG-specific performance is the main hurdle to integration.
“True ESG integration is an issue that investors and allocators alike have been wrestling with for many years and not something we feel is going to be simply resolved over time,” Vidrio and Close Group observed in the study.
The report surveyed a mix of corporate pension funds, endowments, fund managers, funds of funds, OCIOs and others in both the North America and EMEA regions.
Allocators and managers are also similarly split on how important they consider ESG to be as an investment factor, and how they apply ESG factors into their risk and opportunity assessments.
Close to a quarter (23.08 per cent) said ESG is a key investment factor, in line with financial factors, within their investment processes. But the same number said that while ESG is a key investment factor, it is at a lower weight than financial factors, while a further 23.08 per cent said the importance of ESG factors depends ultimately on the strategy and underlying investment. Some 30 per cent did not consider ESG to be key investment factor.
At the same time, 38 per cent actively apply ESG factors to their risk and opportunity assessments, 31 per cent do not, while 23 per cent are not currently applying ESG factors, but plan to in the future. About 8 per cent are awaiting more concrete regulatory standards before formally incorporating an ESG framework into investment decision-making processes.
Quizzed on the main drivers for ESG integration, most fund managers (80 per cent) said the question did not apply to them. But elsewhere, other drivers of ESG integration among managers include alpha generation (10 per cent), meeting client/LP demands (10 per cent), helping the firm remain competitive (10 per cent), and advancing their firm’s competitive positioning (10 per cent).
On the investor and allocator side, the drive for ESG integration is fueled mainly by board or stakeholder demand (72.73 per cent). Meanwhile, creating alpha was the main driver among 18.18 per cent of respondents, while managing risk (18.18 per cent), aligning with market best practices (18.18 per cent), and aligning with peers (9.09 per cent) were also cited as major drivers.
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics ESG & Responsible Investing Impact Investing Results & performance Research & AnalyticsSS&C GlobeOp Hedge Fund Performance Index at 0.45 per cent
The SS&C SS&C GlobeOp Hedge Fund Performance Index for October 2021 measured 0.45 per cent.
Hedge fund flows as measured by the SS&C GlobeOp Capital Movement Index advanced 0.59 per cent in November.
"SS&C GlobeOp's Capital Movement Index rose 0.59 per cent in November 2021, indicating positive net flows into hedge funds. This gain compares favourably to the 0.27 per cent increase reported a year ago," says Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies. "With this strong result, hedge funds are on pace to finish 2021 with the highest rate of net inflows since the post-financial crisis year of 2012."
Like this article? Sign up to our free newsletter Author Profile Related Topics IndexesManaged Funds Association forms international partnership with CAASA
Managed Funds Association (MFA), an organisation representing the global alternative investment industry, has announced the Canadian Association of Alternative Strategies and Assets (CAASA) as the first international member of the MFA Partnership Program.
“CAASA's membership features an impressive cross-section of the private funds ecosystem, including fund managers and allocators. Partnering with CAASA is an important step for the expansion of our regional partnership program,” says MFA President and CEO Bryan Corbett. “The inclusion of international partners supports MFA’s expanding global presence to better meet the needs of our globally-focused members and their investors—including pensions, foundations, and endowments."
CAASA is the largest association representing the alternative investment industry in Canada with more than 320 members — including alternative investment managers, pension plans, foundations, endowments, and service providers — and has organised more than 80 webinars in 2021 plus six multi-day conferences. Its membership and activities span all alternatives from hedge funds and venture capital to real estate and cryptocurrencies. Founded in 2018, CAASA's mission is to bring Canada to the world and the world to Canada by promoting information sharing, networking, and collaborative initiatives between its members and the industry at large.
"Joining the MFA Partnership Program enables CAASA to expand further its extensive member offering, including events, educational resources, and networking capabilities, and provide a platform to showcase Canada as a global leader in alternative investment management," says James Burron, President and Co-Founder of CAASA.
The MFA Partnership Program aims to enhance the collective power of national, regional, and state alternative investment industry networks. The program works to increase collaboration, promote information sharing, build key allocator relationships, and create a more efficient and effective network to support, educate, and connect in markets in the US and around the world.
"CAASA members will gain access to an unparalleled network of peer organisations in the US through the relationship with MFA," sasaysid MFA Chief Commercial Officer Brooke Harlow. "The MFA Partnership Program will provide them the resources to stay on top of the latest policy, regulatory, and operational developments impacting alternatives and private funds investors and allocators."
Current members of the MFA Partnership program include the California Alternative Investments Association, Connecticut Hedge Fund Association, New York Alternative Investment Roundtable, Palm Beach Hedge Fund Association, and Texas Alternative Investments Association.
CI Financial makes strategic investment in alt investment platform GLASfunds
CI Financial Corp (CI) has made a strategic investment in GLAS Funds (GLASfunds), a turnkey alternative investment platform and alternative asset management firm based in Cleveland.
Founded in 2009, GLASfunds is a tech-enabled platform providing investors with secure and streamlined digital access to institutional-quality alternative investment opportunities and asset management oversight. It has approximately USD1.1 billion in combined assets under management and assets under contract.
CI’s investment will strengthen GLASfunds’ offering to the broader market, while providing CI Private Wealth clients with enhanced access to alternative asset classes through a best-in-class platform.
“Alternative assets are an increasingly important part of investing today and having an execution platform like GLASfunds is a critical foundational component to our strategy in this space,” says Kurt MacAlpine, Chief Executive Officer of CI Financial. “Making this investment will enable us to deliver a better client experience, which is incredibly important as we work to build the leading high-net-worth and ultra-high-net-worth wealth manager in the US.”
“We are thrilled to work with CI to bring our leading alternatives solution to CI Financial and their fast-growing CI Private Wealth group,” says GLASfunds Managing Partner Michael Maroon. “Alternatives have become a core component of high-net-worth client portfolios, but the process to invest has often been cumbersome. We simplify that process, enabling advisors to deliver even better investment management service. Having CI as a strategic partner will enhance our capabilities and reach and broaden our appeal to all advisor firms seeking an alternative investment platform.”
GLASfunds is thoughtfully designed to reduce the difficulties advisors and their clients face in the alternatives space. Through the platform, advisors can aggregate client capital and invest in alternatives through a fully digital dashboard, streamlining the process and reducing the paperwork typically required to execute a customised alternatives portfolio. GLASfunds provides quarterly updates, timely performance estimates and one aggregated K-1 report across all positions. GLASfunds’ expert team can also provide additional analytics, portfolio construction support and more. The reduced administrative burden, simplified investment process and access to top-tier alternatives make GLASfunds an exceptional solution to add to CI Private Wealth’s growing investment capabilities.
CI will take a strategic minority stake in GLASfunds, with an option for majority ownership over the next four years.
Like this article? Sign up to our free newsletter Author Profile Related Topics Deals & Transactions Finance & Insurance InvestmentsGlobal private credit market focusing on sustainability
According to a new research paper, Financing the Economy, published by the Alternative Credit Council (ACC) in partnership with Allen & Overy, private credit managers are accelerating the integration of ESG into their investment strategies and engagement with businesses on sustainability.
The ACC surveyed 57 private credit managers and investors based across the US, Europe and Asia Pacific that collectively manage more than USD600 billion. The research found that 74 per cent already integrate ESG into their investment strategies and consider it to be a core part of their approach to due diligence, borrower engagement and investor reporting.
Beyond investing, the survey found that managers are a growing source of guidance and technical support on sustainability issues for many SMEs and mid-market businesses. Almost half of private credit managers see this service as their biggest value-add on ESG issues, and nearly a third see their ability to influence ESG outcomes as their biggest strength.
A third of firms reported offering ESG-focused private credit products that incentivise businesses to become more sustainable, for example by linking the interest rate to ESG-related criteria. Such products are likely to become more prevalent, with a further 28 per cent of respondents planning to make loans with ESG-linked financial incentives in the future.
The research reveals that private credit managers provided an estimated USD196 billion of credit to the economy during 2020, a 74 per cent increase on the USD113 billion respondents predicted they would invest when surveyed last year.
The main recipients of credit continue to be SMEs and mid-market businesses, with 74 per cent of respondents’ most common loan size being below USD100 million. The research also finds that a significant part of the market is now focusing on larger businesses, with 26 per cent of respondents describing their most common loan size as greater than USD100 million, up from 10 per cent last year.
Jiří Krόl, Global Head of the Alternative Credit Council, says: “It is encouraging to see how quickly the industry adapted and deepened its approach to ESG integration. There is broad agreement that we are still in the early stages of development when it comes to methodologies, loan documentation and engagement practices. It is also clear that while regulation can be helpful in some ways, the real driver of change is the industry’s desire to innovate and deliver for its borrowers, investors and society at large.”
Jake Mincemoyer, Head of US Leveraged Finance at Allen & Overy, adds: “Over the last decade, private credit has developed into a global and highly-diversified market, in excess of USD1 trillion. With the increasing volume of capital being provided to SMEs and middle-market businesses and the growing size and frequency of mega-deals in private debt, managers have also seen greater focus on ESG principles across the global private credit market. While some regions have seen broader adoption of these changes than others, there is no doubt that ESG principles will remain a growing focus over the coming years.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Surveys & researchCitigate Dewe Rogerson appoints hedge funds specialist as Director
Citigate Dewe Rogerson, an international financial and corporate communications consultancy, has appointed Dominic Tonner as Director.
Dominic is a hedge fund and private equity strategic communications specialist who joins from a leading reputation management consultancy where he advised clients across financial services and other sectors. Previously he was Global Head of Communications at the Alternative Investment Management Association (AIMA), the global hedge fund industry body, from 2014-2018. He spent the first 14 years of his career as a journalist, contributing to The Sunday Times and the Financial Times, among other titles.
He will be working closely with Senior Director Christen Thomson, who founded Citigate Dewe Rogerson's rapidly growing, award-winning hedge funds practice in 2016, and who was Deputy CEO and earlier Head of Communications at AIMA from 2008-2014. The pair worked together at AIMA from 2009-2014.
Citigate Dewe Rogerson's hedge fund practice is centred on London, New York, Paris, Hong Kong and Singapore. Client strategies covered include equity long/short, credit, quant, event-driven, activist, distressed, global macro, FX, crypto, emerging markets, biotech, disruptive tech and ESG. Its services to hedge fund management firms include advising on special situations, crisis and issues management, profile building to institutional investor audiences and marketing support.
Chris Barrie, Managing Director, Citigate Dewe Rogerson, says: “Dominic adds significant value to our financial services team given his experience as a journalist, in the industry and in agency. He will also be invaluable to our rapidly growing hedge funds practice."
Christen Thomson, Senior Director, Citigate Dewe Rogerson, adds: "I am very glad to be working again with Dominic, who has tremendous expertise and experience in hedge funds. With our growing team and our international network of offices in the major hedge fund industry centres worldwide we are well-placed to support a complex, sophisticated industry.”
Dominic Tonner, Director, Citigate Dewe Rogerson, says: “I have closely followed Citigate Dewe Rogerson’s impressive growth in the global hedge fund industry over the last five years, and I am really pleased to be joining Christen and the rest of the team as we seek to drive the next phase in the firm’s expansion."
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsCoinShares appoints two Independent Non-Executive Directors
CoinShares International Limited (CoinShares) has appointed Christine Rankin and Viktor Fritzén as Independent Non-Executive Directors of the Company.
Rankin is a former Partner at PWC and has held positions of trust at several organisations including Spotify, NASDAQ and Cherry AB. She currently holds the position of Senior Vice President, Corporate Control of Veoneer, a worldwide leader in automotive technology. Christine earned her Bachelor in Business Administration and Economics from Stockholm University. She is a Swedish citizen and is based in Stockholm, Sweden.
Fritzén held the positions of Global Investment Research Analyst and Corporate Finance Analyst at Goldman Sachs and GP Bullhound respectively, before joining LeoVegas Group as CFO. He currently holds the position of non-executive director on the boards of Avanza Bank Holding AB, StickerApp Sweden AB and others. Viktor earned his Master in Finance from the Stockholm School of Economics. He holds both Swedish and American citizenship and is based in Stockholm, Sweden.
Daniel Masters, Chairman of the Board, says: "It is with great pleasure that I announce the appointment of two new Board Members. Christine brings a wealth of experience in financial control and audit. Her broad, high-level, multi-jurisdictional and Main Market experience makes Christine an optimal candidate. Viktor Fritzén brings a rare combination of high profile, public company experience, and a natural enthusiasm and appreciation for the digital asset industry. These appointments in combination with our highly talented incumbent board are another important step by CoinShares on the path to up-listing to the regulated segment of NASDAQ OMX. I would like to extend my warmest welcome to both our new members and I look forward to continuing the CoinShares journey with our new colleagues aboard."
Rankin adds: "I am excited to join the Board of CoinShares at such an exciting time in the Company's journey. I hope to contribute to the Group's continued success."
Fritzén says: "I have been invested in CoinShares' products since 2015 and have been impressed by CoinShares' track record across all its business areas. For many years I have had a strong belief that great businesses will be made in the intersection of the crypto-economy and traditional finance and CoinShares is one of the best-positioned technology companies for this megatrend. I am delighted to join the CoinShares Board of Directors and look forward to being a part of this exciting journey."
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital Assets Moves & AppointmentsBitfinex enables deposits and withdrawals for tether tokens (USDt) on Avalanche
Digital token trading platform Bitfinex has enabled its users to deposit and withdraw Tether tokens (USDt) on the Avalanche transport protocol.
The launch of USDt on Avalanche, a decentralised smart contracts platform built for the scale of global finance, further expands the reach of USDt, the largest stablecoin by market capitalisation.
The Avalanche protocol is designed as a highly scalable ecosystem with the aim of delivering near-instant transaction finality while levying low transaction fees that are fractions of a cent.
“I’m sure our growing user base will appreciate the immediacy of access to Avalanche’s highly scalable and decentralised network,” says Paolo Ardoino, CTO at Bitfinex. “Avalanche’s community is growing and flourishing as the protocol continues to gain traction within the wider digital token ecosystem.”
USDt is supported by numerous e-commerce platforms and payment gateways, and already provides faster payment as compared to credit and debit cards, and traditional payment systems.
Bitfinex is leveraging its position as one-stop shop for crypto trading offering a variety of services, including margin trading with up to 10x leverage.
Like this article? Sign up to our free newsletter Author Profile Related Topics Digital AssetsCTAs now set for their best year since 2014
CTAs and trend-following hedge funds remain on track for their best annual performance since 2014’s landmark performance, with managers continuing profit from continued trends across bonds, equities, indices and commodities markets in the run-up to year-end.
Société Générale’s main CTA Index – which charts the daily performances of 20 of the largest CTAs, including funds managed by Man AHL, Graham Capital, Systematica, AQR, and Aspect Capital – remains up more than 9 per cent this year. It ended October on a high, generating 2.56 per cent for the month, though the first week of November has seen it give back 0.72 per cent.
With just two months left until the end of 2021, the index – a key industry benchmark – is on track for its best performance since 2014, a banner year for CTAs which saw the sector advance more than 15 per cent annually.
Meanwhile, trend-following hedge funds, as measured by SocGen’s SG Trend Index, added more than 3 per cent last month, before dipping 1.34 per cent in early November.
Overall, the benchmark – which comprises the daily returns of 10 of the biggest trend-following hedge funds – is up 12.43 per cent since the start of 2021. The gain, which is roughly double 2020’s 6.28 per cent annual return, is also the index’s largest since 2014’s stellar 19.7 per cent rise.
SocGen indicated that short positioning on bonds’ downward trend, long bets on equity indices during October, and the continued rise across energy markets have fueled the sector’s momentum lately.
On the flipside, currencies have proven “more challenging” for trend-followers amid inconsistent markets moves, aside from the yen’s weakening against the dollar.
Overall, some 90 per cent of all the individual CTAs in the SocGen CTA Index and SG Trend Index generated positive performances in October, with a number of managers gaining over 5 per cent, SocGen’s data shows.
Elsewhere, the SG Short-Term Traders Index added 1.95 per cent last month, and has stayed roughly flat so far in November, to put its year-to-date returns at 2.19 per cent. Eight out of the ten funds in the index – a performance snapshot of CTAs and global macro managers with 10-day trading windows – were in positive territory in October, with two again gaining more than 5 per cent.
Tom Wrobel, director of capital consulting at Société Générale Prime Services and Clearing in London, noted that many trend-following strategies are comfortably in double-digit territory in the 10-month period since the start of January.
“The key sectors for CTA performance appear to have been commodities and equities in 2021, but October also highlighted that all asset classes are important, with significant opportunities for trend-followers in bonds, depending on individual model time-frames and portfolio construction approaches,” Wrobel said this week.
“It was encouraging to see shorter-term CTAs also record a positive month, as institutional investor interest in CTAs remains high; and industry reports indicate that alongside multi-strategy funds, CTAs have enjoyed the largest capital inflows among major hedge fund strategies this year,” he added.
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Funds Markets Results & performance Investing in Hedge FundsSEC wins fraud jury trial against hedge fund manager
Jurors in a Boston federal court have returned a verdict in the Securities Exchange Commission’s favour against a hedge fund adviser and his investment advisory firm.
Gregory Lemelson and Massachusetts-based Lemelson Capital Management LLC were charged with fraud in September 2018 for reaping more than USD1.3 million in illegal profits by making false statements to drive down the price of San Diego-based Ligand Pharmaceuticals Inc.
The SEC’s evidence at trial showed that after establishing a short position in Ligand through his hedge fund, Lemelson made a series of false statements to shake investor confidence in Ligand and lower its stock price, increasing the value of his fund’s position.
The false statements included assertions that Ligand’s investor relations firm had agreed that Ligand’s most profitable drug was on the brink of obsolescence and that Ligand had entered into a sham transaction with an unaudited shell company in order to pad its balance sheet.
The evidence also showed that Lemelson had boasted about bringing down Ligand’s stock price through his “multi-month battle” against the company.
The jury found Lemelson and Lemelson Capital Management liable for fraudulent misrepresentations. The court will determine remedies at a later date.
“Investment professionals play a crucial role in our markets and when they break the law they undermine investors’ trust,” says Gurbir S Grewal, Director of the SEC’s Division of Enforcement. “We’ll continue to use all of the tools in our toolkit to hold wrongdoers accountable, including litigating whenever necessary. This verdict underscores that commitment as well as our staff’s ability, tenacity, and experience to win those trials.”
The SEC’s litigation was conducted by Marc J Jones and Alfred A. Day of the Boston Regional Office. The SEC’s investigation was conducted by Virginia Rosado Desilets, Sonia Torrico, and Jennifer Clark, and supervised by David A Becker and Carolyn Welshhans.
Like this article? Sign up to our free newsletter Author Profile Related Topics Legal & Regulation North AmericaSeward & Kissel’s first report on SMAs highlights convergence of major industry trends
A first-of-its-kind report on separately managed accounts (SMAs) in the hedge fund industry from national law firm Seward & Kissel LLP reveals that investor demand for bespoke products has resulted in an increase in SMAs.
The SMA Snapshot Report offers detailed metrics on the individualised accounts that are increasingly favoured by large ticket investors.
“The demand by investors for specific terms and strategy exposure is substantial, and only growing, which has been a large contributor to the increase in SMAs,” says Steve Nadel, a partner in the Investment Management Group of Seward & Kissel and lead author of The SMA Snapshot Report. “We feel that the uptick in SMAs reflects the convergence of the four biggest trends impacting the industry – greater investor demand for bespoke products, private asset exposure, ESG sensitivity, and cryptocurrency.”
For 45 per cent of the SMAs studied, managers deviated from the investment strategy of their flagship hedge funds to accommodate investor mandates around a handful of priorities, including ESG considerations, exposure to privates and digital assets, as well as other issues.
The report also reveals that most investors in SMAs (52 per cent) are funds, while 25 per cent were high-net-worth individuals and family offices, and that the vast majority (82 per cent) of SMA managers have more than two years of experience as hedge fund managers; 61 per cent had more than five years of experience.
Insig delivers ESG scoring solution to support CarVal Clean CLO product line
Insig AI, a data science and machine learning solutions company providing ESG solutions to the asset management industry, has now delivered its ESG scoring tools to CarVal Investors (CarVal), a global alternative investment manager, to support its risk scoring methodology.
This follows the Company's previous announcement "Insig to support CarVal Clean CLO Product Line" released on 23 July 2021.
Insig AI's ESG solutions supports CarVal's ESG risk assessment model measuring each asset across six themes:
Climate Change, including carbon emissions and carbon footprint
Natural Capital, including raw material sourcing and water stress
Pollution, including toxic emissions and waste
Human Capital, including health and safety and labour management
Product Liability, including product safety and consumer financial protection
Corporate Governance, including ownership and board (structure/composition)
These measurements have been utilised to create a composite ESG risk assessment that is then comparable at an individual credit and portfolio level.
Lucas Detor, a managing principal of CarVal Investors, says: "At CarVal, we believe ESG risks can have a material impact on the performance of credit investments. The creation of this ESG-compliant platform now enables us to measure ESG risk at an issuer and portfolio level to create a unique and attractive product for investors. This strategy aligns with our long-term goals of reducing the cost of capital for ESG-minded companies by creating an independent, auditable and comparable risk assessment model. We are pleased that Insig AI has helped put us in pole position to deliver a unique and optimal product for both investors and for society."
Steve Cracknell, CEO of Insig AI, says: "We are delighted to have worked on this ground-breaking product line with CarVal Investors. Today's news is the culmination of a long collaboration. We look forward to working with CarVal on its other fixed income offerings."
Alter Domus and Canoe Intelligence partner to deliver automation and accuracy to alternative data management
Alter Domus, a provider of integrated solutions for the alternative investment industry with USD1.3 trillion in global AUA, and Canoe Intelligence (Canoe), a financial technology company redefining data management processes for alternative investors and allocators, have formed a strategic partnership to provide clients with alternative data management solutions that combine best-of-breed automated technology and data accuracy.
By partnering with Canoe, Alter Domus will modernise and bring scale to its existing alternative data management and asset servicing businesses, while continuing to deliver exceptional service to its 1,700 global clients. Canoe’s automated technology for alternatives and private markets will significantly streamline Alter Domus’ ability to collect and categorise documents, and extract, validate and deliver data to downstream systems. Ultimately, this will enable Alter Domus to bring the most comprehensive alternative data management solution to the market.
“We’re excited about our strategic partnership with Canoe and look forward to delivering our combined data management solution to alternative investors,” says Jared Broadbent, Head of Fund Services, North America at Alter Domus. “Our combined data management solution will change how data is consumed by limited partners.”
“This partnership with Canoe is an exciting one for us and really builds on the technology infrastructure we’ve developed at Alter Domus,” says Darren O’Banion, Chief Technology Officer at Alter Domus. “We are combining Canoe’s tools with our own data management tools to provide an industry-leading data solution. We’re proud to partner with market leaders to deliver tech-enabled solutions to the industry and look forward to passing these benefits and efficiencies along to our clients.”
Since its commercial launch in 2018, Canoe has enabled more than 125 alternative investors and allocators to scale their businesses and has become the industry-standard approach for automating alternatives documents and data management. Canoe leverages shared intelligence from its diverse client base of institutional investors, capital allocators, asset servicing firms and wealth managers, and a growing fund master database of over 14,000 funds across numerous asset classes. This scale enables Canoe to ingest high volumes of complex documents and create instantaneous access to actionable data.
“We’re proud to partner with leading fund administrators like Alter Domus to bring automation and scale to its existing suite of services for alternative investors,” says Jason Eiswerth, CEO at Canoe Intelligence. “The combination of Canoe’s automated technology and Alter Domus’ data management services will enable investors to have the best of both worlds when it comes to managing their alternatives documents and data.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Technology & software solutionsEnterprai launches new way for global macro players to stay of top of financial markets
Enterprai – an AI-powered SaaS workstation for global macro professionals – has launched a set of products offering global macro portfolio managers, traders, and analysts a new way to stay on top of financial markets.
Off the back of strong demand for its product the Company is now embarking on its next funding round, seeking to raise a further USD10 million of growth capital to invest in tech and talent to further fuel client expansion.
Following 18 months of product research and development, Enterprai has built a proprietary event-driven architecture powering supervised machine learning models. From today, subscribers can scan, analyse, and monitor the latest market developments across multi asset classes including, FX, fixed income, equity derivatives. Additional features that will integrate both crypto currencies and central banks communications into Enterprai’s workstation are currently in production.
Enterprai is revenue-generating and has seen fast adoption of its workstation and data products by leading market players both on the sellside and buyside. Many portfolio managers, traders and analysts across global macro hedge funds, traditional asset management firms and bulge-bracket investment banks have already highlighted the alpha generating potential of Enterprai’s predictive analytics.
Highlights of the product offering include the ability for users to:
Gain an unprecedented view into FX and Rates market behaviour, based on live transactional data
Identify days from the past that show similar trading patterns to today’s market movements
Answer the question “what is driving asset prices today?”
Enterprai’s engineering, quant and strategy team have worked for some of the world’s preeminent financial and AI organisations – including BlackRock, Goldman Sachs, Morgan Stanley, Credit Suisse, Principal Global Investors and PolyAI - building infrastructure for machine learning data collection and constructing pre and post-trade analytics.
Enterprai’s product roll-out follows a successful funding round backed by 15 global angel investors including, Silicon Valley-based chip designer at Intel, Bharat Bharkhada and Arya Setiadharma, one of Indonesia's most prominent angel investors.
Many global macro professionals – including those with experience from Rokos Capital Management, UBS and Barclays – who initially came to Enterprai as test users, subsequently invested as angels after discovering the full power and potential of the Company’s workstation and data analytics. These individuals have also played an important role in working alongside Enterprai’s team of quants and engineers to develop a set of products fit for the end user.
Deyan Ulevinov, Chief Product Officer, and co-founder of Enterprai commented on the product roll out, says: “Collaboration with leading scientists and academics plays an important role in our product development. Enterprai is fortunate to be working with Professor Rama Cont, Chair of Mathematical Finance at the University of Oxford – who chairs our scientific advisory board – and Professor Johannes Ruf, from the mathematics department at the London School of Economics. This level and calibre of collaboration ensures our product division continues to pioneer ‘best in science’ value propositions for our clients.”
Wojciech Mucha, CEO, and co-founder of Enterprai, adds: “Many macro players are currently missing out on hidden opportunities in new essential unstructured datasets. While the current market size for third party data providers is worth USD50 billion, Preqin estimates that as of August 2020 59 per cent of fund managers are not using big data as part of their daily workflow. Working alongside our global community of senior portfolio managers and traders Enterprai is changing this and leading the way in the adoption of big data by the industry.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Technology & software solutionsWomen- and minority-led hedge funds pull ahead, but industry still lags traditional assets
Hedge fund strategies have lagged stock markets and traditional equity/bond portfolios in recent years, driving down management and performance fees – but firms led by women and minorities are pulling ahead of their industry peers when it comes to returns, new data published by Bloomberg shows.
Over the last five years, hedge funds have trailed stock markets as well as more traditional portfolios comprising a standard equities and bonds mix. According to the Bloomberg All Hedge Fund Index, hedge funds gained 34.43 per cent between September 2016 and September 2021, while the S&P 500 scored a 98.66 per cent return, and traditional portfolios up 62.14 per cent, over the same period.
The latest Bloomberg Hedge Fund Chartbook for Q3 shows Asia Pacific (Emerging)-based hedge funds leading the pack in terms of performance, posting a 35.37 per cent median one-year total return, and a three-year annualised total return of 12.46 per cent.
By comparison, North America-based managers have made a one-year total return of 17.59 per cent, and a three-year annualised total return of 7.23 per cent in the same period.
Elsewhere, hedge fund performances in Europe shows a clear east-west split, with Eastern Europe-based managers up 18.01 per cent over the 12-month period compared to Western Europe-based managers’ 9.62 per cent gain. Longer-term, Eastern Europe managers have generated a 7.12 per cent three-year annualised total return, compared Western Europe-based managers’ 4.97 per cent gain over the same period.
As diversity and representation has emerged as a major area of focus within the hedge fund industry, Bloomberg’s research shows that firms headed by women and minorities are outperforming their market peers.
Hedge funds with women as the majority represented in management have generated a median one-year return of 21.63 per cent, while funds with minorities leading the management board are up 29.59 per cent over the same period. In contrast, hedge fund managers without those attributes have returned 12.70 per cent. On a three-year annualised return basis, women-led hedge funds are out in front with a 10.62 per cent return, followed by minority-managed/led funds, which have gained 7.75 per cent, while those with a non-diverse management are up 6.37 per cent.
Meanwhile, pension funds and foundations continue to dominate hedge funds’ public investor pool, collectively comprising more than half of the industry’s publicly-reported client base at 27 per cent and 26 per cent, respectively. Corporations make up almost a quarter, at 24 per cent, with endowments accounting for 6 per cent of hedge fund investor capital, and government allocations making up 3 per cent.
With equity-focused managers accounting for roughly a third of total industry assets, the strategy remains the most popular among allocators, making up 26 per cent of hedge fund commitments. Credit hedge and event driven account for 20 per cent of commitments each, followed by macro (17 per cent), multi-strategy (11 per cent), relative value (4 per cent) and insurance (2 per cent), analysis from Bloomberg’s Hedge Fund Investor Database shows.
As industry performance lags the broader equities market, hedge fund fees have continued on a downward trend. The traditional ‘two and twenty’ fee structure is less common, with the median management rate across all strategy types now standing at 1.25 per cent, and the median performance fee at 15 per cent.
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Diversity & Equality Results & performance Investing in Hedge FundsBSO becomes fastest provider to B3 connecting international traders to Latin America’s largest exchange
BSO, a global infrastructure and connectivity provider, has become an approved international network provider for Brazilian stock exchange B3.
B3 (Brasil, Bolsa, Balcão), headquartered in São Paulo is the largest exchange in Latin America and BSO is now the lowest-latency vendor registered with the exchange and connecting international traders to the Latin American hub. By strengthening its Latin American offering and widening access to the region, BSO is providing international traders with faster, more cost-effective access to one of the world’s most promising financial services market.
The connection is bolstered by BSO’s recent introduction of a direct ultra-low latency connectivity route between Brazil and Europe, in partnership with express optical platform EllaLink. The route, the first direct connectivity route between the regions, cuts latency in half making it easier than ever for institutional traders in Europe to connect to the major Brazilian trading hub. The route also opens up a wider range of possibilities for proprietary trading firms, capital banks, hedge funds and other market participants, across multiple asset classes.
“We are so thrilled to be working with B3 at a strategic level, to put in place ultra-low latency connectivity and infrastructure to help it succeed in its drive to extend its international reach. With our experience in delivering connectivity around the world, BSO is well-placed to help trading participants globally access the B3 exchange and capitalise on the immense opportunities that it offers,” says Michael Ourabah, CEO of BSO.
“B3 is a strong, thriving market and we are especially delighted to be able to help more European traders access it with the lowest latencies available between the two continents, as they seek to discover alpha strategies for achieving the highest returns” said Tony Jones, BSO’s Head of Low Latency. “With this partnership we are now going further establishing direct links between B3 and other exchanges around the world including London, France, Singapore and Turkey.”
“BSO, with all its connectivity capacity and ultra-low latency infrastructure, will help B3 expand its operations with international investors, who, in turn, can access assets available on one of the most important stock exchanges in the world”, says Claudio Jacob, International Business Development Managing Director at B3. “Bolsa do Brasil is committed to providing a necessary experience for its clients and, therefore, understands the need to continue investing to stay ahead in performance, security, scalability and transparency. This partnership further strengthens our range of connectivity products,” reinforces Jacob.
EEX to launch new WECI indexes
The European Energy Exchange (EEX) has launched the EEX Weekly European Cheese Indices (WECI) which will bring further price transparency to the European dairy market.
Published on Wednesdays and based upon price contributions from physical dairy market participants, the indices will cover four of the major European “commodity” cheeses: Cheddar Curd, Mild Cheddar, Young Gouda and Mozzarella.
The launch of the WECI indices is the result of an extensive pilot programme that has been supported by a cross-section of Europe’s leading companies from the dairy supply chain. EEX has developed the index specifications and price reporting methodology to accurately reflect spot/nearby prices in the underlying physical market.
At the time of launch, the indices will be supported by companies from eight different European countries representing the dairy supply chain, ranging from dairy co-operatives and processors through to traders and food manufacturers. Going forward, the WECI aims to attract further participation with EEX actively encouraging interested parties to participate, thereby increasing transparency in the European dairy markets.
Peter Blogg, Agricultural Commodities Expert at EEX, says: “The launch of ‘EEX Weekly European Cheese Indices’ is another positive step in our ambition to bring further price transparency and new hedging opportunities to the European dairy market. The design and launch of these innovative new indices has been supported by some of Europe’s leading dairy companies and organisations. We look forward to their continued support as we move forward to make the WECI indices the principal reference for wholesale cheese prices in the European market.”
At the time of launch, the “EEX Weekly European Cheese Indices” will be based entirely upon data contributed by individual companies. In the future, EEX may also consider the possibility to include additional price sources.
Like this article? Sign up to our free newsletter Author Profile Related Topics Commodities & Resources Indexes InvestmentsEmissions-focused hedge fund reaps rewards for Trium in battle against climate change
Launched in September 2019, the Trium ESG Emissions Impact Fund uses a market neutral long/short investment strategy to target high-emitting companies in hard-to-abate sectors – such as energy, mining and chemicals – where successful transformations in the form of decarbonisation and lower CO2 emissions can offer attractive long-term returns.
The Fund is led by portfolio manager Joe Mares (photographed above), a financial markets veteran of almost 25 years, who previously managed a global long/short equity portfolio at Société Générale. That followed stints at high-profile hedge funds Moore Capital and GLG, where at the latter he had been lead equities and commodities analyst for star manager Greg Coffey. Mares began his career at Morgan Stanley in 1997, specialising in equity research for the energy and shipping sectors.
So far this year, the Trium ESG Emissions Impact fund – which manages around USD100 million in assets in a daily liquid UCITS format – has generated uncorrelated returns in the face of stock market volatility and soaring energy prices. Since launch, it has had a -0.29 correlation and a -0.06 beta to the STOXX Euro 600.
The Fund is one of a number of liquid hedge fund and alternative investment offerings from Trium, a family office-backed asset manager based in London, which also include quantitative equity, macro and market neutral funds.
Starting from scratch
Reflecting on the early days of the strategy, Mares says that while there was a sizable amount of ESG long-only product at launch, the amount of market-neutral strategies focused on ESG was, and still is, limited.
He believes that most hedge funds, regardless of their strategy – be it global macro, convertible arbitrage or merger arbitrage – find it tricky to retrospectively incorporate ESG or climate change as the main driver of what their strategy is trying to accomplish.
“We decided we were going to start from scratch and set up a fund that actually has ESG as its core purpose,” Mares tells Hedgeweek.
“Our view was that of the roughly USD4 trillion of hedge fund assets out there, at least some of the people invested in that, in market neutral, were going to be also interested in environmental and social goals,” he says of the strategy’s origins. Today, the Fund’s investor base comprises over 30 or so clients, diversified across a range of mostly European institutional clients.
“We felt that if climate change is going to take decades to fix, and during that time we’re going to have multiple bull and bear markets, then we should try to create a product which could actually survive a bear market.”
To successfully execute that approach, Mares and his team decided early on to focus exclusively on high-emitting industries and sectors, such as energy, mining, industrials, and agriculture, where certain hard-to-abate sectors – like aviation, steel, and chemicals and transport industries – face particularly high decarbonisation costs.
In terms of investment opportunities, the Fund looks to identify improvers and transformation stories – those companies that are able to decarbonise most effectively within their respective sectors.
“That’s where the problem is,” he adds. “90 per cent of the problem is coming out of 30 per cent of the sector.
“We may sometimes buy clean tech stocks, and we may sometimes buy ESG stocks with very, very high ratings. But generally we’re focused on companies that are transforming – we are trying to buy companies that are going to be great stocks in three or four years, from an ESG perspective, rather than today. That gives us a very different shape of portfolio.
“We will also short stocks. Sometimes we will be short oil stocks, sometimes steel stocks – we are trying to be sector neutral,” he continues.
“We’re not trying to run a portfolio that’s long utilities, short energy, or long industry, short mining. We’re trying to find within each sector those who are going to be the leaders in the decarbonisation process.”
Pathway to change
The portfolio comprises mostly medium-sized stocks, and the team looks to engage with company management where possible. While giants like Shell and Exxon have garnered considerable column inches in recent times, Mares is resolute on the strategy’s mid-cap focus.
“Transformations of companies of that scale are extremely difficult,” he observes. “We believe many of the more successful and rapid transformations can happen in more medium-sized companies.”
Expanding further on this point, he continues: “We’re not trying to find the best renewable stock, or the best electric vehicle stock. That’s probably 90 per cent of the media attention, but if you actually look at where the emissions are coming from, large chunks are coming from the sectors that are not going to get fixed by renewables or electric cars.
“Instead, we focus on steel and cement, and pulp and paper, and some of these other sectors – such as fertilizer – which we think are not as well-understood in terms of the transition pathways, and where there are higher barriers to entry, but where there are many more opportunities when companies actually do find that pathway to change.”
So as the ESG juggernaut continues to gather momentum, with an assortment of high-profile hedge fund managers now leading the impact investing charge, what sets Trium Capital’s ESG Emissions Impact strategy apart from the pack?
“We always get asked who our peers and our competitors are, and the reality is there are a handful of them and we are all doing slightly different things,” Mares says.
“One of the differences for us is that we are very focused on being strictly market neutral. Secondly, if you look at what’s in our long book, it doesn’t overlap that much with what’s in the typical ESG long-only fund’s long book.
“In general, the hedge fund industry has a very rapid turnover of positions. I’d say if there’s a very rapid turnover of positions in your book, it’s hard to argue that it’s being done with an ESG criteria, that an ESG criteria is driving that.
“We are talking about transformations that are going to take years. The hedge fund industry is generally not set up to basically underwrite ideas for multiple years.”
This approach has ultimately helped the strategy’s performance stay uncorrelated from the broader market.
Warming to this point, Mares continues: “A typical energy transition fund is focused much more on financing renewables projects. But we would argue that those will offer fixed income-type returns. To get equity returns, you have to attack some of the harder problems, which is what we look to do.
“Certainly for the companies that we’re in – those hard-to-abate sectors, whether it’s cement or steel – they're going to require a much higher carbon price and energy price to transform themselves, and I think we're starting to see that,” he says of this year’s soaring energy prices.
“All else being equal, having high energy prices – high prices for natural gas, oil and coal – is going to assist the energy transition.”
He adds: “Finally, so much of the move over the past 20 years in all investing has been about data, quants, AI. That has its place in ESG, and can be incorporated from an ESG perspective, but what we are doing is individual stock-picking,” he explains.
“We try to evaluate each company, and how they can transform themselves, and it’s very hard to get a computer to do that for you – it’s very hard to do that using historical datasets and running back-tests, because, frankly, the companies are literally changing now, and the regulation is changing as we speak.”
Here and now
Talk inevitably turns to the COP26 climate summit taking place in Glasgow, described by some as the world’s last best chance to meaningfully address the environmental crisis. While Mares is hopeful the event will dictate the direction of travel among governments and economies, he believes challenges remain around effective implementation.
Mares says his team are more focused on specific national regulations – such as the US infrastructure bill and various EU proposals – rather than the longer-term objectives at COP26, such as net zero by 2050 or 2060.
“The challenge of COP, rather than with the EU or national governments, is that it is hard for them to have an enforcement mechanism,” he notes. “Ultimately what matters is the action, not the commitments, and they need at least all of the largest economies to work together to achieve those goals.
“We’re much more focused on the here-and-now, rather than on long-term goals, because you’re not going to get to the long-term goals without the here-and-now.”
Over the long run, Mares maintains the Fund stands to benefit from “tremendous regulatory tailwinds”, pointing to the range of ways the EU and US are driving investors towards decarbonisation.
“Regulators want to do it with new technologies, with new products, and with new arrangements with customers on how they pay,” he says. “We’re trying to capture what I would describe as a tailwind, which is occurring over years, but in the short-term, you often have hurricanes going in the other direction.”
He points to the stock market fluctuations over the past 18 months, which ultimately had little to do with decarbonisation, and was more driven by a once-in-a-lifetime pandemic.
“Yes, there was an environmental component to that, but clearly it wasn’t the dominant driver of the government response,” he concedes.
“So while we have a tailwind for many years in this strategy, we’re like anyone managing money – in the short term, ESG is not always the dominant driver of what makes stocks go up and down every day. It’s not going to just be a straight run for the next 30 years in terms of decarbonisation.”
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics ESG & Responsible Investing Impact Investing Long-short investing Investing in Hedge Funds