Hans Schlaikier, Hedgeweek

Sovereign wealth funds gain assets… Asian hedge funds enjoy positive September…

Sovereign wealth funds globally have added more than USD750bn to their total assets since last year, according to research firm Preqin.

The growth, from USD4.62 trillion assets under management in 2012 to USD5.38 trillion in 2013, is largely down a number of new funds formed over the last few years, according to the firm, as well as capital injected into existing sovereign wealth funds. 

Preqin says Asia-based sovereign wealth funds have shown some of the largest growth in assets under management, with the assets of these sovereign wealth funds growing, on average, by 19 per cent since 2012. This is in comparison to the average 6 per cent growth in assets under management exhibited by Middle Eastern sovereign wealth funds. In fact, Asia-based sovereign wealth funds account for a significant 47 per cent of global aggregate sovereign wealth fund assets, despite only representing 22 per cent of sovereign wealth funds globally by number.

Amy Bensted, head of Hedge Fund Products at Preqin says: “Despite the challenging financial landscape and political unrest, sovereign wealth funds have continued to thrive and to grow, and this trend is predicted to continue over the next few years. We are still seeing new launches of sovereign wealth funds, with many countries approving plans for new launches over 2012-13.”

15 new sovereign wealth funds have been launched since 2008, with eight of these being launched in the past two years alone.

In total, 63 per cent of sovereign wealth funds have seen an increase in their assets under management since 2012.

The proportion of sovereign wealth funds investing in private equity and hedge funds has decreased over the past year, from 57 per cent and 38 per cent investing in private equity and hedge funds respectively in 2012 to 45 per cent and 31 per cent respectively in 2013. Preqin says some of this decline can be accounted for by the growth in the number of new sovereign wealth funds being established, as these newer sovereign wealth funds typically will not allocate to alternative investments for a few years as they build up their investment teams and accumulate assets.

Hedge funds, which have struggled to match the performance of mutual funds and equities for most of the year, trended up in September as the Eurekahedge Hedge Fund Index grew 1.05 per cent.

According to the latest Eurekahedge newsletter September performance showed Long/short equity and event driven funds posting the strongest returns on the back of strengthening equities. Over the month long/short equity funds were up 2.10 per cent while event driven managers gained 1.90 per cent.

Investing in distressed debt has been the strongest strategy YTD, while CTA/managed futures posted their fifth straight month of losses.

A strong September could be a sign that hedge funds are finally taking part in the global recovery, and just in time for new rules that will allow U.S. funds to advertise publicly for investors. Some hedge fund managers are doubtful that this will actually prove to be fruitful, but it does open up a lot more capital, even if it comes in smaller packages.

Asian hedge funds are doing better than their American counterparts, according to the Eurekahedge newsletter. Asian hedge funds excluding Japan have outperformed their underlying markets by 7 per cent YTD, while Japanese hedge funds were up an amazing 21.25 per cent YTD. Total assets under management in the global hedge fund industry are also on the rise, currently at USD1.91 trillion and likely to set a new historical record by the end of the year.

Asia Pacific market analysts are more effective at providing accurate price forecasts than their US and European counterparts.

As reported by Hedgeweek earlier this week Man GLG, in a paper entitled “Where are the World’s Best Analysts?”, found that Asia ex-Japan analysts were able to generate excess returns (short-term alpha) of 4.06 per cent over a 90-day period, while Japan analysts were able to generate 2.37 per cent. In comparison, UK analysts generated 1.49 per cent and US analysts 1.71 per cent.

The results were based on IBES data provided by Thomson Reuters spanning the period 2005 to 2012. What is interesting is that the performance of Asia ex-Japan analysts has improved in recent times. When the overall data was split into two periods either side of the financial crash, 2005 to 2008 and 2009 to 2012, excess returns were found to increase from 2.5 per cent to 4.3 per cent.

The findings of the research showed that whilst analysts from all regions were able to add value, those in Asia Pacific ex-Japan were able to add the most value, delivering a strong uptick in outperformance and steady cumulative return that exceeds four per cent over 100 days. By comparison, Japanese analysts delivered a much stronger initial uptick in outperformance over the first couple of days, locking in the majority of alpha before levelling off from day 10 onwards.

Results show that whereas Japanese SELL recommendations are still profitable after 100 days (approximately -0.6 per cent), US analyst SELL recommendations are already in positive territory over the same period.

The difference in analysts’ performance between emerging and developed Asia markets (e.g. Australia, Hong Kong) was similar, both generating around three per cent returns after 50 days. Japanese analysts seem particularly adept at providing both accurate buy and sell recommendations because the markets do not view them as making their own forecasts but rather company forecasts. In other words, Japanese analysts are like conduits for company information. Their recommendations are based closely on corporate management according to the research, whereby companies provide them with good and bad news.

Allianz Global Investors has brought a former employee back from a hedge fund to take over an Asian stock strategy.

The firm will hand its GBP36.2 million Total Return Asian Equity Fund and an offshore fund to Pan Yu Ming, who returned to Allianz this week, Financial News reports. He will succeed Raymond Chan, chief investment officer for Asia-Pacific equities at the firm, who has managed the fund for the past three months. The fund is down 4.3 per cent between April and September of this year. Chan will now serve as deputy manager under Pan Yu Ming.

Pan Yu Ming formerly managed two other funds for Allianz before moving to CSOP Asset Management in 2010.

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