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Greatest asset raising environment in the history of the hedge fund industry Submitted 07/09/2021 - 12:52pm

By Don Steinbrugge (pictured), Agecroft Partners – The next 15 months will be the greatest asset raising environment in the history of the hedge fund industry and potentially a once-in-a-career opportunity for managers to grow assets. The strength of asset flows to managers will be much stronger than many industry professionals expect and potentially surpass USD1 trillion. 

This should become clear as they consider these three factors that drive asset flows to managers: asset size of the hedge fund industry, manager turnover rate within investors’ portfolios, and net flows to the hedge fund industry. All of these point to record asset flows to hedge fund managers and are further described below:
 
Size of the hedge fund industry. BarclayHedge reported that hedge fund industry assets ended the 2nd quarter at an all-time high of more than USD4.3 trillion. This is up seven-fold from approximately USD600 billion at the turn of the century. Asset growth in the industry has been incredibly resilient, reaching new highs in 17 of the last 20 years. A majority of asset growth over the past decade is primarily attributable to compounding of industry assets due to positive performance and only a small amount came from positive net industry flows. 
 
With limited net inflows of assets to the hedge fund industry, the size of the industry assets under management is an important driver of new asset flows to fund managers. Over the past 10 years, the hedge fund industry has been very Darwinian: Manager turnover within investors’ hedge fund portfolios has been responsible for almost all new asset flows to managers. Holding net industry inflows and manager turnover constant, the higher the hedge fund industry assets, the more new assets will flow to managers. 
 
Manager turnover rate within investor’s portfolios. There is a natural rate of manager turnover that fluctuates over time within the hedge fund industry and can have a massive impact on new asset flows to managers. For example, a 15 per cent turnover rate of managers on USD4.3 trillion in assets results in USD645 billion in new asset flows to managers. If the turnover rate increases to 25 per cent, nearly USD1.1 trillion will flow to new managers. The manager turnover rate is typically driven by how investors perceive the relative quality of a manager versus others in their strategy, or by changes in target hedge fund strategy weightings within the portfolio. We expect manager turnover to reach an all-time high in calendar year 2022 due to pent-up demand, the large dispersion of returns among managers, and changes in hedge fund strategy preferences. 
 
Pent-up demand to hire new managers. Covid 19 artificially reduced manager turnover. Coming into the pandemic, investors typically required an in person meeting with the hedge fund organisation before making an allocation. Travel restrictions effectively cancelled all in-person meetings, thereby putting most new manager hires on hold for calendar year 2020. Assets placed during the year were significantly reduced. The allocations made were typically with managers the investor had met before Covid 19 or recommended by their investment consultant. During the first half of 2021, we have seen a growing, but still small, number of investors gain comfort in allocating to managers based solely on virtual meetings. 
 
Although the resurgence of Covid caused by the Delta variant has slowed the opening of many offices, we expect travel to pick up throughout the 4th quarter with most offices opening by 1 January. This will significantly increase the pace and efficiency of both investment due diligence and operational due diligence on new managers. It will also be the strongest catalyst for achieving record levels of manager search activity, manager turnover, and flows to new managers in 2022. 
 
Large dispersion of performance among managers. Over the past 18 months, we have seen a complete market cycle. The largest selloff in the capital markets since 2008 was followed by one of the strongest bull markets in history. This market volatility has led to a large dispersion of performance across managers within similar strategies and across strategies. The turnover rate of managers in investors’ portfolios is positively correlated with the level of dispersion in returns across managers. Simply put, if most managers' performance is similar, few managers get terminated. When relative performance is widely dispersed, as was the case in 2020 and 2021, the rate of manager turnover increases significantly.
 
Changes in hedge fund strategy preference. The volatility in the capital markets over the past 18 months has also changed investors’ perception of relative values across the capital markets. This will influence investor preferences for hedge fund strategies and increase manager turnover. Allocations to less desirable strategies will be redeemed and the assets will be reallocated to managers in preferred strategies.
 
Net flows to the hedge fund industry. BarclayHedge reported positive net inflows during the past 12 months of USD148.8 billion. This resurgence of net new investments follows a decade of nearly flat net flows to the hedge fund industry. We expect this recent trend to continue due to strong hedge fund industry performance, low interest rates and a two tiered fee structure benefiting large institutional investors.
 
Strong industry performance. After a long period of broadly lacklustre results across the hedge fund industry, performance over the last 18 months has sparked renewed investor confidence. Hedge funds are typically added to investors’ portfolios to provide diversification and are expected to significantly outperform the capital markets during market selloffs. 2020 began with the largest selloff in the capital markets since 2008 and, for the most part, hedge fund performance met investor expectations. The modest drawdowns in the first quarter were followed by strong performance during the last 9 months of 2020. This resulted in the average hedge fund delivering net returns of almost 11 per cent for the full year 2020. The first six months of 2021 saw hedge fund industry performance up approximately 10 per cent, marking the strongest start to a year since 1999. Performance in 2020 and 2021 has led to growing investor confidence in the hedge fund industry and will help drive continued positive net industry flows.
 
Interest rates and credit spreads near all-time lows. Many large institutional investors evaluate the attractiveness of an asset class based on expected returns, volatility (risk) and correlation with other asset classes. Interest rates and credit spreads near all-time lows render fixed income strategies relatively less attractive. Interest rates cannot go much lower and credit spreads cannot get much tighter. As such, the negative correlation benefits typically anticipated from a “flight to quality” during equity market sell-offs will have limited positive effect on bond prices. The risk of owning fixed income has also increased, because the duration of bonds (sensitivity to interest rates) increases in low interest rate environments. 

Finally, return expectations in the mid 2 per cent range make diversified fixed income portfolios less attractive to most public pension funds, whose actuarial rate of return assumptions are around 7 per cent, and to endowments and foundations with payout ratios of 4 per cent after allowing the fund assets to grow by the inflation rate. Many of these large institutional investors will continue to allocate away from low yielding fixed income investments to hedge fund strategies with higher expected returns and uncorrelated performance to the capital markets. Investors who do not view hedge funds as a separate asset class will invest part of their fixed income allocation to hedge fund strategies such as, distressed debt, specialty financing, structured credit, reinsurance and relative value fixed income among others. 
 
Two tiered fee structure benefiting large institutional investors. High fees have historically been one of the biggest complaints about the hedge fund industry from large institutional investors. This fee pressure over the past decade has helped bring the average management fee down to 1.38 per cent and performance fee down to 15.9 per cent as reported by Eurekahedge. What typically is not mentioned, is the two tiered fee structure that has been adopted by the industry. Most hedge funds are willing to provide significant discounts to their standard fees to attract large institutional investors.
 
In addition to the volume of inflows at record levels for the hedge fund industry, we are also seeing many Hedge Funds no longer accepting assets. Based on data they received from Preqin, Bloomberg recently reported that a record 1144 hedge funds have closed to new money. Additionally, more than half of the largest multi manager funds, often referred to as multi-strategy, are no longer accepting new clients. This creates opportunities for new managers to fill the void.
 
What does all this mean to hedge fund managers? For managers seeking to raise assets and build new investor relationships, this may be a once in a career opportunity to do so. Most hedge fund managers have spent very few resources on travel or marketing over the past 18 months. Now is the time to use those resources to get in front of as many investors as possible. The most efficient way to do so is to participate in cap intro events hosted by both prime brokers and independent companies. Many of these will take place in January 2022 and managers who participate in multiple events will potentially have the opportunity to meet with more investors over a two-week period than they would be able to travel and see over the following six months. 
 
This is not the time for managers to rely on posting their fund information and performance to industry databases and hope investors will come; very little new business comes from this strategy. Investors respond much better to a catalyst such as a cap intro event or in person meeting. Following the January cap intro events, hedge fund organizations should plan a heavy travel schedule for the first half of 2022. Once investors work through their pent up demand for new managers, we expect search activity to decline. This heavy travel schedule is also advisable for Managers that have had disappointing performance.  To reduce the likelihood of redemptions, managers should be sure clients understand what drove the underperformance and are confident in the managers’ future performance.
 

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EFA selects NeoXam for regulatory reporting Submitted 07/09/2021 - 10:48am

EFA, a provider of administrative services to the funds industry in Luxembourg, has selected NeoXam’s Impress Regulatory Edition to help meet its regulatory goals. 

A calculation engine and advanced visualisation interface were key factors behind EFA’s decision to select NeoXam.
 
The regulatory environment around funds has drastically increased in recent years and this trend is expected to continue. As a leading provider of the fund industry in Luxembourg, EFA is committed to providing its clients with the best service and the most up-to-date tools to respond to their existing and future regulatory requirements. To this end, EFA wanted to adopt a dedicated platform to industrialise the operations of its teams of experts.
 
This decision both reinforces and expands the long-standing relationship between EFA and NeoXam initiated with the adoption of the back-office investment accounting tool NeoXam GP.
 
Gary Janaway, COO at EFA, says: “The ability to provide our clients with a full range of regulatory reports with increasing demand for digital output led EFA to extent our partnership with NeoXam. Primary factors that influenced our selection were the ability to manage the integrity and quality of data from internal production systems and to import data from external sources. Impress Regulatory Edition facilitates our clients’ need for high quality branded regulatory reports and provides EFA with a high capacity production capability.”
 
Florent Fabre, COO of NeoXam, adds: “The future of reporting is undoubtedly industrial and digital. We develop high-performance and innovative solutions that meet the demanding expectations of the market to support our customers. We’ve worked closely with EFA for over a decade now and look forward to continuing to support them in their growth.”

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Qomply adds to advisory team Submitted 07/09/2021 - 9:51am

Qomply, a transaction reporting technology firm, has made David Peniket, former President of ICE Futures, Europe, the latest appointment to its high-profile advisory team.

Before joining Qomply, Peniket helped spearhead the growth of Intercontinental Exchange (ICE) in Europe through an 18-year tenure at ICE Futures Europe, including over a decade as President. Peniket led the ICE team which helped create the European Climate Exchange, and participated in a number of asset purchases, notably the creation of the Dutch exchange ICE Endex and the acquisition and integration of NYSE Euronext. Before joining ICE, Peniket was a financial management consultant at KPMG.

Since retiring in 2017, Peniket has continued his service to ICE, where he serves as Chair of ICE Futures US and a member of the ICE LIBOR Oversight Committee. He serves on the Advisory Board and Risk Committee at Prism FP and chairs the Development Committee at Wesley House, a Methodist College in Cambridge.

Michelle Zak, Director, Qomply, says: “David stands out as one of a small group of people in the financial industry who truly understands the ever-changing dynamic of financial markets and its participants. Throughout his career, he has exemplified the acumen necessary to drive, grow and expand a company. It is always personally satisfying to see such a creative and adaptive mind in the industry, and we are excited that David is joining us.”

Peniket says: “Qomply’s tools use technology to solve a pressing customer problem: how to provide executives, their boards and their regulators with assurance that their regulatory reporting is as complete and accurate as possible. I am delighted to have the opportunity to help Michelle and the brilliant Qomply team as the growth of their business accelerates.”

Peniket's appointment adds to that of Peter Green, an industry veteran and visionary who joined Qomply in March 2021.

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Regulated Investment Exchange launched by Bitfinex Securities Submitted 07/09/2021 - 9:49am

Bitfinex Securities, a provider of blockchain-based investment products, has launched a regulated investment exchange in the AIFC Fintech Lab, aiming at increasing accessibility to a large set of financial products for eligible members who wish to diversify their portfolio.

The Bitfinex Securities platform is designed to facilitate the raising of capital for issuers seeking to have their tokenised securities publicly traded through an easily accessible ‘admission to trading’ process. This meaningful step for the industry will widen access to a variety of innovative financial products, including notably blockchain-based equities and bonds, along with investment funds.

“As a pioneer in blockchain-based securities, we aim to be the most liquid exchange of its kind in the world,” says Paolo Ardoino, CTO at Bitfinex Securities Ltd. “Bitfinex Securities Ltd. provides a regulated platform serving small and medium-cap companies that are currently underserved by existing, inefficient capital markets.”

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FundRock launches Middle East ManCo Services Submitted 07/09/2021 - 9:35am

FundRock, a European third-party UCITS Management Company (ManCo) and Alternative Investment Fund Manager (AIFM), has launched  FundRock (ME) Ltd (FundRock ME), in the Abu Dhabi Global Market (ADGM) following full regulatory approval by the ADGM Financial Services Regulatory Authority.

FundRock ME operates a fully authorised ManCo for Qualified Investor Funds and Exempt Funds in the ADGM enabling asset management clients to streamline their operations in a cost-effective manner. As a subsidiary of the Apex Group, FundRock ME offers Middle East ManCo Services previously delivered under the LRI Middle East brand.
 
FundRock ME plans and coordinates all steps in fund structuring and all the legal and administrative requirements relating to the fund and investors. This new offering includes third-party ManCo services as well as in-depth advice on the opportunities, risks and requirements for designing, setting up and managing a tailored investment fund in the ADGM.
 
Services offered by FundRock ME include:

Managing a Collective Investment Fund
Managing assets
Arranging deals in investments
Advising on investments or credit
 
As part of the Apex Group, FundRock ME enables clients to benefit from access to a wide range of complementary fund administration, middle office, banking, depositary and custody services that are offered globally.
 
The business will be led by Senior Executive Officer Faisal Hasan, CFA, and Chief Risk Officer Martin Bond who bring a combined four decades of experience in financial markets in the GCC region.
 
Xavier Parain, Head of FundRock, says: “The launch of FundRock in the dynamic and fast-growing ADGM jurisdiction further strengthens our strategic intent to represent asset managers across their portfolio, helping them to tackle the complex regulatory requirements of cross-border fund distribution and supporting their asset raising activities.”
 
Faisal Hasan, CFA, Senior Executive Officer, FundRock (ME) Ltd, adds: “We are excited to announce the launch of FundRock ME, with an experienced team in place to act as the ideal partner for asset managers, institutional clients and family offices who wish to set up their funds and distribute them within the ADGM. As part of the Apex Group, FundRock ME offers a powerful solution for asset managers, providing local substance combined with global connectivity, enabling clients to focus on their core business.”

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Investors are turning increasingly bullish on hedge funds, new Barclays outlook shows Submitted 06/09/2021 - 8:55pm

The resurgent investor appetite for hedge funds is underlined in new data from Barclays’ Prime Services Capital Solutions unit, which shows allocator flows turning positive for the first time in four years, new hedge fund launches outweighing liquidations, increased investor willingness to make allocations without in-person meetings, and total industry assets soaring to an all-time record of USD4 trillion.

The latest ‘Hedge Fund Industry Update – Outlook for 2H21’ from Barclays’ Prime Services Capital Solutions group noted global hedge fund industry assets reached an all-time of high of USD4 trillion during the first half 2021, a year-on-year rise of some 9 per cent, and the biggest growth since 2013.

At the same time, hedge fund industry flows have turned positive for the first time since 2017, the data shows, with investors adding USD18 billion during the first half of 2021 as flows stayed positive over the last four quarters.

The first quarter of 2021 also saw more hedge funds launched than closed, the first time since 2014 that launches outweighed liquidations. The total number of funds stood at 8,092 at the end of Q1, according to Barclays data – up from 8,054 at the end of 2020.

Barclays’ Strategic Consulting team surveyed more than 200 investors, collectively representing some USD415 billion in hedge fund assets, and a total of around USD4 trillion in total assets under management during June to gauge allocator sentiment on the sector.

Polling found that investor sentiment towards hedge funds is even stronger than in Barclays’ 2021 Outlook, with appetite strengthened by a mix of high equity values, inflation and hedge funds’ strong performance last year, when the industry posted annual returns of some 12 per cent.

“Investors seem keen on reducing cash and fixed income and increasing exposure to hedge funds and, as in previous years, illiquid asset classes,” it said.

Strategy-wise, sector-specialist hedge funds are most in favour among allocators, with the survey showing some 28 per cent of investors planning to grow allocations to those managers, with healthcare-focused strategies leading the way.

Around 15 per cent of allocators intend to increase allocations to event driven special situations, 13 per cent plan to add capital to equity market neutral funds, with 12 per cent opting to pour more capital into discretionary macro and multi-strategy managers.

The analysis also gauged the impact of Covid-19 and related travel restrictions on investor allocations to hedge funds, and explored the extent to which new allocations have been made without meeting managers due to social distancing and lockdowns.

Meetings with hedge funds in the portfolio was a key driver for 90 per cent of managers polled, while 78 per cent said meetings with hedge funds not in their portfolio was a main driver of travel. That compares with 55 per cent naming conferences, and 44 per cent opting for operational due diligence, as key drivers for travel.

But close to two-thirds – 61 per cent – of investors expect to travel less compared to pre-Q1 2020, compared to 4 per cent saying they plan to travel more. Some 20 per cent said they intend to travel the same amount as before the pandemic, though 15 per cent said it remains too early to say.

“Meeting hedge funds appears to be the key driver for investors to travel, though a majority indicated they plan to travel less post-pandemic as they appear willing to allocate without in-person meetings,” Barclays noted.

Specifically, some 61 per cent of investors have now allocated to new managers without meeting in-person first, with 60 per cent planning to make allocations. Private banks are the most keen, with 79 per cent having both made allocations and planning to make allocations without meeting in-person. Among family offices, some 70 per cent have made allocations, and 63 per cent are planning to make allocations, while fewer than half of endowments and foundations have made allocations (44 per cent) or are planning to make allocations (43 per cent).

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EEX Group European power spot markets up 6 per cent in August Submitted 06/09/2021 - 3:34pm

EEX Group's European Power Spot markets volumes were up up 6 per cent in August to 50.4 TWh y-o-y driven by both Day-Ahead (+6 per cent) and Intraday (+3 per cent) markets

Power Derivatives in Europe reported double-digit growth to 313.7 TWh driven by record volumes on Nordic markets achieving 3.4 TWh, triple-digit growth on Belgian, Austrian and Swiss markets, and an almost  doubling of options 12.7 TWh.

A record number of contracts were cleared in August for Japan Futures with a growing number of new participants: 988 contracts traded along the curve in August amounting to 707 GWh.

US Power Derivatives increased by 28 per cent to 164.1 TWh

Thenatural gas markets saw great performance on both spot (+15 per cent to 111.5 TWh) and derivatives (+47 per cent to 70.6 TWh) in European markets with spot markets seeing double and triple-digit growth for the majority of hubs.

In derivatives markets meanwhile, German GASPOOL volumes grew almost six fold compared to August 2020 and Dutch TTF was up 48 per cent.

EGSI Futures saw record participation on Friday, 27 August, with 270 contracts traded representing 10 per cent of overall TTF Derivatives that day.

North American environmental markets rose by 176 per cent to a new record volume of 31,703 contracts (previous record in February 2021: 29,580 contracts).

Dry Freight markets meanwhile, were up 60 per cent to 87,988 lots driven by Freight Futures which almost doubled to 76,868 lots.
 

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Litigation funding platform AxiaFunder launches automated Secondary Market Submitted 06/09/2021 - 3:29pm

AxiaFunder has launched its automated Secondary Market operating as a Bulletin Board (Secondary Market), offering investors secondary trading functionality. The technology was developed by ShareIn Ltd. 

This facility will provide sellers with the potential to reduce their minimum holding periods on investments which would otherwise typically take two to three years to reach an exit. It will also help sellers to manage liquidity and risk. Buyers will be able to access cases that are already funded – enabling increased portfolio diversification.  

For claimants, AxiaFunder expects that the Secondary Market will in time become more liquid, which should tend to increase the availability of litigation funding while also lowering its cost.

The AxiaFunder Secondary Market will be carefully supervised. It will be important to ensure equal disclosure of information to buyers and sellers. It will not be possible to trade case investments close to key case events such as, for example, a mediation process or court hearing. Confidentiality of case information will be protected through the execution of non-disclosure agreements by all prospective investors. 

AxiaFunder will monitor the proposed selling price for each investment. The sale price will depend on several factors including the contractual entitlement of the security over time if the case wins; the prospect of success; and the liquidity & risk preferences of the seller. 

Cormac Leech, CEO of AxiaFunder, says: “Because litigation funding is relatively high risk, the AxiaFunder platform is only suitable for sophisticated and high net worth investors. Investors should also be aware that Capital is at risk and returns are not guaranteed, and past performance is not a guarantee of futures results. Potential investors should also carefully read and understand the risk warnings before participating." The AxiaFunder platform’s onboarding process includes a risk-based questionnaire which is to ensure the investors are fully aware of the potential risks involved in litigation investment.

AxiaFunder has to date, funded 13 cases with a total amount invested of cGBP1.9 million. We expect to close 2 more offers in the coming weeks, which will increase the total funded to GBP2.5 million. So far, five cases have resolved with an average annualised return for investors of 55 per cent. Eight cases are ongoing. In the long term, adjusted for losses, we expect the platform will generate average investor returns of at least 20 per cent per annum. Case investments are uncorrelated with each other. There are therefore substantial benefits from building a diversified portfolio. Case investments are also of course uncorrelated with other asset classes and the broader economy. Some of the cases are partially principal protected via insurance, mitigating downside risk.   

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Goldman Sachs’ hedge fund and private equity unit Petershill unveils London listing plan Submitted 06/09/2021 - 1:52pm

Petershill, a private equity unit of Goldman Sachs that takes minority stakes in alternative investment firms including hedge funds and private equity managers, has unveiled plans for a new publicly-traded vehicle on the London Stock Exchange.

Goldman is preparing an initial public offering (IPO) for the new unit, Petershill Partners, which will provide direct minority equity investments and acceleration capital for hedge funds and private equity companies.

Petershill currently holds minority stakes in 19 private equity, hedge fund and other alternative asset management firms, which together have some USD187 billion of aggregated assets under management and which were previously held in private funds managed by Goldman Sachs Asset Management (GSAM). 

These assets – which include holdings in high-profile hedge fund firms Caxton Associates and LMR Partners, as well as tech-focused private equity outfit Francisco Partners – will be rolled into the new publicly-listed company.

The deal would involve the issuance of some USD750 million of new shares, along with the sale of existing shares, according to a London Stock Exchange filing. The new unit could be worth around USD5 billion, media reports on Monday suggested.

Petershill Partners will be a fully independent standalone company run by the GSAM team which was founded in 2007 as the first minority stake acquirer in alternative asset managers, the LSE announcement said. In the past, Goldman Sachs Asset Management’s original Petershill Fund I held minority positions in a number of well-known hedge fund managers, including Winton Capital and CapeView Capital.

Goldman described the plan as a “distinctive and compelling” alternative asset management industry proposition. 

It pointed to a “significant and growing” AUM opportunity and private market investment universe sized at USD1.2 trillion, a diversified global investment group, and a “proven track-record of creating ‘win-win’ strategic partnerships” across the hedge fund and private equity spectrum, with the ability to “anticipate thematic trends and pivot investment strategies over time into new, fast-growing opportunity sets.”

Naguib Kheraj, non-executive chair of Petershill Partners, said the London listing would make available to public market institutional investors a “unique opportunity” to access stakes in a number of leading privately owned alternative asset managers.

Ali Raissi, co-head of the Petershill group within Goldman Sachs, described the IPO as a “natural next step”, adding Petershill has established itself as a “partner of choice in the private capital sector” over the past 14 years.

Robert Hamilton Kelly, co-head of the Petershill group within Goldman Sachs, said: “We believe our long track record of creating win-win partnerships and the extremely high barriers to entry in this industry position us well to continue to deliver growth and generate attractive returns for all stakeholders.”

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Etrading establishes al token identifiers Taskforce with ITSA Submitted 06/09/2021 - 9:18am

Etrading Software (ETS), acting as exclusive Registration Authority for the new International Organization for Standardization’s (ISO) standard ISO 24165 for Digital Token Identifiers (DTIs), and International Token Standardization Association (ITSA), the non-profit organisation aiming at setting market standards for the global token economy, have formed a new joint task force to identify potential synergies regarding the identification of digital tokens.

The Digital Token Identifier Foundation (DTIF) was created by Etrading Software to provide ISO standard identifiers for digital assets based on open data principles. The joint task force is charged with identifying synergies in the issuance processes of both the DTI and the International Token Identification Number (ITIN) - the technical identifier issued by ITSA for both fungible and non-fungible DLT-based cryptographic tokens. The task force was established in May and is due to run for the next 6-12 months.

Sassan Danesh, Managing Partner of Etrading Software, says: “Etrading Software is working hard to ensure that ISO DTI 24165 can be seamlessly integrated with existing industry standards. The integration of the DTI with other relevant standards, which have different functions but are intrinsically linked, will reduce operational complexity and costs of the DTI, as well as providing a clear link between an asset and a digital token that represents the asset.” 

Constantin Ketz, Vice Chairman of ITSA, says: “ITSA is keen to cooperate with other standards bodies and initiatives to ensure the interoperability and complementary nature of all market standards. We are convinced that collaboration and alignment of existing standards will lead to accelerated adoption of digital tokens as well as increased efficiency and accessibility for market stakeholders. Therefore, we are very happy to be working with Etrading Software on finding synergies between ITIN and DTI.”

A key deliverable of the task force will be to produce a set of recommendations for collaboration to DTIF and ITSA boards, including an outline implementation plan. These might include aligning DTIs and ITINs, automatic notifications between issuing authorities or white-label access and/or federated model.

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3forge significantly increases trading platform development productivity Submitted 06/09/2021 - 9:15am

3forge, a specialist in real-time and historical data visualisation technology, has launched the industry’s first web-based Integrated Development Environment (IDE) aimed at accelerating and simplifying the creation of complex dashboards and workflows by bringing the entire process of development, debugging and deployment into a single, seamless interface. 

The intuitive IDE solution is directly built into the dashboard, providing advanced tooling and instrumentation mechanisms that significantly increases developer productivity in complex platform environments.
 
3forge’s AMI, which for manages an estimated 20 per cent of daily US market equity transactions, is an enterprise modular environment for front-end, browser-based, business-critical applications and workflows, powered by high-volume, high-velocity data from virtually any source. Business users benefit from visual dashboards powered by real time data from across millions of data points, with actionable insights that are specific to their role for rapid, critical decision making. 3Forge goes beyond data visualisation by creating seamless workflows allowing users to instantly act upon decisions by triggering events within the same interface, without the need to switch between applications.
 
The fully embedded IDE enables developers to navigate the dashboard’s object model, creating and testing richer and highly customised dashboards in dramatically less time. Additional integrated capabilities include the ability to directly:

•Set breakpoints and step through code
• View local variables and tables
• Walk through the call stack
• Inspect visualisations, data models and relationships
• Navigate through the entire dashboard’s object model to inspect object states

The enhanced functionality of the IDE debugger, combined with source control integration, delivers clear error messages and provides smarter diagnostics for each of the AMI components. Issues are easily investigated and solved as the debugger observes and understands the functionality of the dashboard itself, vastly reducing the time spent diagnosing the problem and encouraging user self-sufficiency.
 
Robert Cooke, Founder and CTO, says: “We are excited to deliver this industry-leading IDE. Over many years working in mission-critical trading environments, we recognise that comprehensive instrumentation and tooling will enable developers to deliver the next generation of platform solutions.”
 
The AMI solution has been benchmarked by the industry and received the following endorsement from a Senior Managing Director at a Tier 1 bank:
 
“It’s no secret that the majority of a developer’s time is spent debugging and diagnosing data inconsistencies. 3forge’s focus on providing easy-to-use data inspection and debugging tools has translated into huge savings for the bank, with on-time deliveries and continuously reliable results.”

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Hedgeye Risk Management secures injunction against former MD in trade secrets suit Submitted 06/09/2021 - 9:01am

Law form Venable has obtained a preliminary injunction on behalf of client Hedgeye Risk Management against former managing director Darius Dale for stealing the investment research house's financial models before resigning to start his own competing business.

Federal Judge Andrew L Carter Jr found that Venable "has established a likelihood of success on the merits" regarding its claims against Dale for misappropriating Hedgeye's trade secrets. Judge Carter granted Venable's motion for a preliminary injunction, enjoining Dale from further accessing and using Hedgeye trade secrets and other confidential information, including source models and customer lists.

"While Hedgeye considers Mr Dale to have made meaningful contributions during his tenure at the company, that in no way gave him the right to take and use confidential and proprietary company information to run his competing business," says Venable partner Tom Wallerstein.

According to the complaint filed in the United States District Court for the Southern District of New York on April 26, 2021, Dale copied confidential source models, took screenshots of spreadsheets, downloaded client contact lists and created an account on a file hosting service that contained the same file and folder names as certain Hedgeye files and folders on his company-issued laptop. He then began to pitch his competing business immediately upon his resignation.

In addition to Wallerstein, the Venable team includes Eric Prager, Antonia Stabile, and Daniel Smith.

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Brummer Multi-Strategy ends August in red, as flagship adds financials-focused long/short hedge fund Submitted 03/09/2021 - 5:02pm

Brummer & Partners’ flagship multi-strategy vehicle slipped into the red during August, with all but two of its underlying managers posting losses during the month. The slide comes as the Stockholm-based fund began allocating capital to Kersley Financials, a new financials-focused long/short equity strategy, on 1 September.

Overall, Brummer Multi-Strategy fell 1.1 per cent last month, a loss which dragged down its year-to-date performance to -0.9 per cent. The twice-levered Brummer Multi-Strategy 2xL version meanwhile gave back 2.4 per cent in August, leaving it down 2.4 per cent overall since the start of 2021.

Long/short equity funds Black-and-White and Manticore proved the biggest detractors last month. With equities recording fresh highs in August, coupled with strong corporate earnings, the Food & Drug Administration’s approval of the Pfizer vaccine, and Jay Powell’s dovish comments from at Jackson Hole helped boost markets, long alpha proved particularly challenging, Brummer said in an update. Black-and-White tumbled 3.8 per cent in August, and has now plummeted more than 17 per cent since the start of the year, while Manticore shipped 2.5 per cent last month, though remains some 0.5 per cent in the black.

Lynx, the systematic trend-follower, lost 2.1 per cent as gains in equities and currencies were outweighed by losses from long oil and long bond positioning, which were struck as oil market rebounds disrupted price trends.

Florin Court, another quantitative managed futures strategy, fared better, advancing 3.1 per cent in August on the back of correct positioning in power, equities and credit, which helped drive year-to-date returns to 14 per cent.

The only other strategy which ended August in positive territory was discretionary macro manager Arete, which was up 1.7 per cent for the month, and 8.7 per cent for the year, after navigating the  month’s volatility and taking profits from equity bets.

Systematic equity manager AlphaCrest lost 1.2 per cent last month, but has stayed positive on a year-to-date basis to the tune of 4.3 per cent. Frost, a fixed income relative value strategy, and machine learning hedge fund Lynx Constellation both fell 1.4 per cent in August, but while Frost has returned 1.3 per cent overall in 2021, Lynx Constellation has tumbled more than 10 per cent in the eight-month period since the start of January. 

Brummer Multi-Strategy also started allocating capital to Kersley Financials, a new financials-focused long/short equity strategy, with an initial pledge of 6 per cent. Portfolio managers Patrik Brummer and Mikael Spångberg decreased their allocation to Black-and-White and Manticore, making minor adjustments to the rest of the portfolio.

The adjustment comes after Brummer withdrew capital from trading-oriented long/short corporate credit-focused hedge fund Observatory, one of the underlying funds in the BMS flagship earlier in the summer.

The vehicle, which was established in 1996, is also set to add another sector-specialist long/short equity fund later in the autumn.

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Integral reports ADV of USD44.2bn in August 2021 Submitted 03/09/2021 - 1:50pm

Integral, a technology company in the foreign exchange market, has reported average daily volumes (ADV) across its platforms of USD44.2 billion in August 2021.

 This represents an increase of +0.5 per cent compared to July 2021 and an increase of +11.1 per cent compared to the same period in 2020.
 
Reported ADV represents volumes traded across the group’s entire liquidity network, including TrueFXTM and Integral OCXTM, in aggregate.
 
Integral’s global trading network has been designed to meet the execution needs of the widest variety of FX market participants, including banks, brokers, asset managers, and hedge funds. Our clients leverage the deep and diverse FX liquidity available through our platforms and have the choice to trade any execution style required, all within an integrated environment

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Luigi Conti joins Axyon AI board Submitted 03/09/2021 - 9:57am

Axyon AI, an AI provider for the asset management industry, has appointed Luigi Conti as an independent board member. 

Axyon AI provides deep learning solutions that help asset managers deliver more efficient and innovative investment products. The company, which includes UniCredit and ING Bank among its investors, operates in close partnership with the renowned AI and computer sciences faculty at the University of Modena and Reggio Emilia.
 
Conti is an experienced executive in the strategy and corporate development area, with a focus in B2B innovative technologies, business models and markets, taking businesses through to exit or sale. Luigi previously served on the board of ADmantX (adtech), where he managed the fundraising process and the successful sale of the company to Vista Equity in 2019. He is currently a Board Member and General Manager of Icoolhunt SpA, a marketing tech company focused on AI-powered trends forecasting.
 
Conti previously served as Vice President for strategy and corporate development at Expert.ai SpA, a public company focused on NLP technologies, and is also an angel investor through the co-founded seed VC Geminea, investing in AI-based start-ups.
 
Conti says: “Artificial Intelligence is experiencing greater investment as asset and fund managers see the value this technology can bring by creating stronger investment strategies, generating alpha and detecting market anomalies. Axyon is an exciting disruptor in the asset management space, and I am excited to join their journey to support the development of the company and bring their leading technology to a larger audience.”
 
Daniele Grassi, CEO at Axyon AI, says: “Luigi’s appointment as an independent board member is just another example of our continued growth. His depth of experience in the strategy and development for AI start-ups will provide powerful insights and help propel Axyon to the next level.”

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Hedgeweek Americas Awards: Macro managers steer through geopolitical turbulence Submitted 02/09/2021 - 5:01pm

The fallout from the Covid-19 pandemic continues to reshape the global macroeconomic and geopolitical landscape, driving both uncertainty as well as opportunity for macro managers – and the Best Macro Hedge Fund category at this year’s Hedgeweek Americas Awards will honour those managers who have successfully steered their strategies through the assortment of rapidly-evolving macro trends.

Macro hedge funds bet on broader macroeconomic trends and themes by trading a range of markets and indices, going long and short across equities, bonds, currencies, and commodities, among others.

The strategy has traditionally been home to many of the hedge fund industry’s best-known and most successful managers, and despite a choppy 2021, the sector is seen as well-placed to capitalise on trading opportunities stemming from monetary policy shifts and the increasingly fragmented geopolitical and macroeconomic landscape arising from the Covid recovery.

Among the strongest performers this year, three strategies have been nominated in the Best Macro Hedge Fund category at this year’s Hedgeweek Americas Awards: HonTe Advisors’ HonTe LH Macro Onshore Fund, Pacific Investment Management Co’s PIMCO Commodity Core Alpha Offshore Fund, and the Calvion Capital Master Fund, run by Calvion Capital Management.

Established in 2015, San Francisco-based HonTe runs a discretionary global macro strategy focused on long-horizon, thematic, multi-asset class plays across both developed and emerging markets. The PIMCO Commodity Core Alpha Master Fund, which was launched in 2018, employs an alternative risk premia investment strategy, focusing on companies globally. Meanwhile, New York-based Calvion – which was founded in 2017 – is an opportunistic, event-driven macro fund which targets emerging markets using a mix of currencies, interest rates, sovereign credit, and equities.

Hedge Fund Research data shows macro managers overall generated annual returns of more than 10 per cent on average last year, with discretionary thematic macro funds up almost 14 per cent in 2020.

While macro strategies have remained in the black this year – scoring an 8 per cent advance in between January and July – 2021 has not been without its wobbles.

Lukewarm performances over the summer – macro funds ended July slightly in the red – have prompted some investors to retreat from the strategy, industry research shows. Allocators withdrew USD1.5 billion during July, according to recent eVestment flows data, which followed USD5.5 billion of outflows in June.

Recognising and honouring excellence among hedge fund managers and service providers in the Americas region, and voted for by participants within the hedge fund industry itself, the Hedgeweek Americas Awards – hosted by Hedgeweek, with fund manager data being provided in partnership with Bloomberg – represent an important mark of recognition and respect among peers, investors, advisors, and counterparties.

A total of 29 fund manager awards will be announced at an exclusive presentation ceremony and industry networking event held at The University Club of New York on 21 October.

To participate in the poll, please click here. For all information about the Hedgeweek Americas Awards, see here.

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CLS launches FX outstanding datasets to enhance FX market transparency Submitted 02/09/2021 - 4:36pm

CLS, a market infrastructure delivering settlement, processing and data solutions, is launching two new datasets to capture outstanding forward and swap positions in the FX market, in addition to making enhancements to its existing suite of alternative FX data products – CLSMarketData.

The new FX outright forward outstanding and FX swap outstanding datasets enable users to improve their analysis of both short- and longer-term FX market trends to provide insight into market dynamics. Outstanding forward and swap position reports will be introduced on a daily basis, helping all market participants benefit from increased visibility into cash flow and directional positioning which will add market color and support pre-and post-trade analysis. The datasets are segmented by market participant type and are available across short- and long-term tenors.
 
Keith Tippell, Global Head of Product, CLS, says: “We have launched FX Outstanding in response to growing demand from our client base for accessible and digestible FX market insights.”

CLS’s position at the centre of the FX ecosystem enables us to capture a uniquely large and diverse amount of data, applying robust data science techniques to create FX alternative datasets that promote market transparency. As the largest single source of FX-executed data available to the market, CLS’s datasets derive from over 1 billion trades dating back to 2002.

To further support client needs and provide greater insight into FX market dynamics, CLS has also made the following enhancements to its existing datasets:

Added a dynamic delivery window for the FX Spot Flow dataset, aggregated every five minutes to meet growing demand for more frequent data delivery
 
Introduced a daily FX Forward Flow dataset to provide a complete end-of-day picture, complementing the existing Flow product suite
 
Incorporated new currency pairs in some datasets to meet demand from regional banks, particularly across Asia Pacific. The new currency pairs are AUD/CAD, AUD/CHF, CHF/JPY, EUR/NZD, EUR/SGD, NOK/SEK and NZD/JPY.

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Cairn Capital completes Bybrook Capital acquisition Submitted 02/09/2021 - 4:29pm

Cairn Capital Group (Cairn Capital), supported by Mediobanca as its majority shareholder, has completed the acquisition and merger with Bybrook Capital (Bybrook).

Bybrook is a London-based specialist credit manager, focused on absolute value stressed/distressed debt and special situations in Europe. It has established an outstanding track record since inception. Bybrook currently manages approximately USD2.4 billion on behalf of top tier international institutional investors.
 
The merger creates a leading European-focused credit manager with global reach and proven track records across the credit spectrum. The combined firm has approximately USD9 billion of assets under management across leveraged finance, structured credit, special situations and stressed/ distressed debt strategies. The complementary research capabilities, sourcing networks, and investment expertise of the combined 30-plus person investment team will expand the available opportunity set. The firm’s robust investment processes will allow for enhanced risk-adjusted returns as opportunity sets shift over time. The combined firm is ideally positioned to offer high-quality investment strategies and customised solutions, including access to co-investment opportunities, throughout the cycle, to institutional investors and strategic partners.
 
Post the closing, Mediobanca retains its majority ownership in the combined firm with the remaining minority ownership shared among senior leadership from Bybrook and Cairn.
 

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Bitfinex Derivatives launches Filecoin and Avalanche perpetual swaps Submitted 02/09/2021 - 4:29pm

Bitfinex Derivatives, a derivatives platform accessible through digital token trading platform Bitfinex, has launched perpetual contracts for Filecoin (FILF0:USTF0) and Avalanche (AVAXF0:USTF0).

FILF0:USTF0 and AVAXF0:USTF0 went live on 02/09/21 at 12:00 PM CET. The contracts offer users up to 100x leverage and will be settled in Tether tokens (USDt).

“We’re delighted to announce the addition of Filecoin and Avalanche to the growing portfolio of perpetual swaps available to trade on the exchange,” says Paolo Ardoino, CTO at Bitfinex Derivatives. “We anticipate great interest in these products, particularly among funds and professional investors for hedging purposes and to manage risk.”

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Gold-focused trend-follower Insch Kintore withstands “rapid reversals” in commodity Submitted 02/09/2021 - 3:54pm

Insch Kintore, the currency and gold-focused CTA hedge fund run by ex-AHL director Christopher Cruden, remains up this year as the precious metal continues on its rollercoaster ride.

The systematic trend-following programme generated an 8.45 per cent gain in the first half of 2021, and while its advance was halted during July and August, the fund has stayed positive to the tune of 6.5 per cent year-to-date, almost double last year’s annual return of 3.39 per cent.

In contrast, gold is down roughly 4.5 per cent since the start of 2021, having dropped 6.5 per cent over the last 12 months.

The precious metal has been on a rollercoaster ride this year, enduring “some pretty rapid reversals” as well as spiking up, Cruden observed.

The novel strategy, which marked its sixth anniversary in February this year, approaches gold as a currency, trading the precious metal as a base currency against G10 currencies on a rolling spot basis.

The algorithm-based quant hedge fund takes an agnostic stance on the direction of gold, and instead trades the volatility of the daily price changes in the 10 currencies against gold as FX crosses. The system looks to generate consistent alpha from buy and sell signals are derived from price breakouts, volatility and other proprietary signals.

“From a trend-follower’s perspective, it’s not been ideal to say the least,” the veteran gold trader told Hedgeweek on Thursday. “It’s been difficult, because there have been a few good moves we’ve caught. But the great curse of trend-followers is that we then get whipsawed.”

Reflecting on the prevailing market landscape, Cruden, a former director at managed futures pioneer AHL, added: “What we do know is that these periods do end, and when they end they tend to end in spectacular fashion. I don’t know whether that will be an up move or a down move, but this period will be over and when it is I suspect it will dramatic, along with other market moves which have been a one-way-street for way too long.”

Launched in February 2015, the Kintore strategy has generated some 86 per cent net return since inception, and today manages more than USD50 million in assets.

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