Preqin interviewed 150 fund managers and 100 institutional investors in June 2014 to ascertain their outlook on the hedge fund industry as we entered the second half of the year. When asked to predict the end of year benchmark value in 2014, 99% of hedge fund managers predicted the All Hedge Funds benchmark would be 11% or less, below the 11.69% hedge funds returned in 2013.
53% of fund managers and 51% of hedge fund investors believe the 2014 benchmark will fall between 4-6%. As of June 30th 2014, the Preqin All Hedge Fund benchmark has posted net returns of 3.68%.
The bulk of this performance was added in Q2 2014, with the benchmark making gains of 2.33% in the second quarter of the year, versus net returns of 1.32% in Q1. Investors are more positive on the outlook for the benchmark than fund managers; 10% of investors believe the industry will make gains of 10% or more in 2014, versus 7% of fund managers.
North American managers are predicting the benchmark to perform better in 2014 than their European and Asia & Rest of World counterparts; the mean benchmark return predicted by these managers is 6.06% versus 5.33% (Europe) and 5.89% (Asia & Rest of World).
In December 2013, 73% of fund managers stated that they had a positive outlook for the year ahead. In June 2014, 57% of fund managers stated the same thing for their H2 2014 outlook.
Overcoming poor performance was among the top three key challenges for H2 2014 cited by all fund managers across the globe. In Asia & Rest of World this was the leading challenge, cited by 28% of fund managers in the region.
In Europe and North America regulation and a challenging fundraising environment pose more of a challenge.
“Hedge fund managers and investors alike entered 2014 in a buoyant mood following two years of double-digit returns and large inflows of fresh capital from investors. However, two-thirds of fund managers noted that generating attractive returns in 2014 would be a key requirement that must be met in order to maintain this positive outlook over the year. This has proven to be a challenge for fund managers, and both these firms and their investors are expecting the industry to not reach the levels of absolute returns of 2012 and 2013.
In turn, 2014 could be shaping up to be a watershed year for the industry; new regulations, a continued challenging fundraising environment and a start to the year which has seen the All Hedge Fund benchmark in the red as many times as the black are undoubtedly posing challenges to hedge funds. Hedge fund managers not only need to focus on their strategy to improve returns, but also on their business from a compliance perspective as well as improving their reach in the institutional investment community, if they are to thrive in the second half of the year.”
The Monetary Authority of Singapore (MAS), the joint central banking and financial regulatory authority, has reported that the total assets managed by Singapore-based fund managers grew by 11.8 per cent to USD945 billion last year, (2013).
The annual report issued by the authority showed promising signs for the investment management sector that is benefiting from regulatory hurdles and modest economic growth in developed markets.
The report states that the funds held by hedge funds crossed USD71 billion in 2013, a sharp increase from figures reported earlier where AUM was USD61.9 billion. At the same time, the country’s private equity sector also fared well. Investors increased the level of assets that were invested in private equity firms, with AUM reaching USD59.7 billion.
The central bank report discusses the reasons the market has performed well: “Growth was broad-based, with both traditional and alternative managers registering good increases in assets under management.
Traditional asset managers continued to contribute substantively to annual growth, driven largely by innovative product offerings, such as multi-asset solutions and specialised fixed income strategies. reflecting increased interest from global investors in Asia-focused strategies. In private equity, there was continued interest from global players to set up in Singapore as they sought new investment opportunities in South-East Asia.” Singapore has a strong regulatory environment for the banking and financial services sector, its openness to buy-side firms has seen an influx of European and US managers migrating to the small Asian island, since the 2008 crisis. Coupled with the notion of enhanced regulations under Dodd-Frank, EMIR and new levies such as the Tobin Tax.
Singapore is classified as the world’s third most liquid centre for FX derivatives trading, according to the most recent BIS Survey, the former British Colony has benefited from implementing robust rulings with enhanced oversight and governance. Ravi Menon, Managing Director of the authority, commented about the measures the bank is taking to enhance its regulatory framework, during the annual report speech:
“MAS is taking a multi-pronged approach to safeguard consumer interests. First, we are enhancing regulatory safeguards for retail investors in unconventional investment schemes.
Second, we will facilitate retail access to simple, lower cost products. Third, MAS will help to empower consumers with enhanced disclosure and information access. Fourth, we are raising standards of financial advice to consumers.”
Morgan Stanley has teamed up with hedge fund boutique Nezu Asia Capital Management to launch one of the Hong Kong-based firm’s flagship funds on its alternative funds platform reports Citywire.
The arrangement sees the Nezu Cyclicals Japan fund made available in a UCITS format.
The fund, which will formally be known as MS Nezu Cyclicals Japan UCITS, invests across Asia in a long/short format with a clear focus on Japan.
Nezu Asia Capital Management runs various strategies with diverse geographical, sectoral and style biases. All the funds adopt a macro-aware, fundamental research driven approach.
Its addition to the investment bank’s FundLogic platform, which is home to a wide array of hedge funds in a UCITS format, is also part of Morgan Stanley’s plans to expand its Asian equity offerings.
Commenting on the launch, Stephane Berthet, head of the FundLogic Alternatives Platform at Morgan Stanley, said: ‘This strategy seeks to generate performance through focused and disciplined fundamental stock picking in Japanese cyclical sectors.’
‘We believe it will complement our existing offering by expanding our coverage of the Asia Pacific region.’
The Dublin-domiciled MS Nezu Cyclicals Japan UCITS fund is set to be registered for sale in France, Germany, Italy, UK, Spain and Switzerland.
The FundLogic platform was launched in 2006 and currently has USD2.8 billion in assets under management across a range of 19 different funds.
Global equity markets are doing well now and the hedge fund industry benefits. That’s the gist of the latest report from Eurekahedge, with its numbers for June 2014 and for the year through June.
Central bank policies continue to support economic activity. In the U.S., the Federal Reserve’s commitment to keep interest rates low “for a considerable time” has taken the edge off its announcement of the end of bond purchases. Meanwhile, the European Central Bank has imposed negative interest rates on bank deposits, in what Eurekahedge calls “an unconventional move to raise inflation to target levels.”
Eurekahedge says that although instability is “brewing again in the Middle East,” things have settled down a bit in Eastern Europe. I should observe that the report was written prior to the shoot-down of a Malaysian jet over the Ukraine. At any rate, Eurekahedge credits the quietude in the former Soviet Union as a reason for the optimism of many investors in June.
Remarkably, all hedge fund regional mandates ended June in positive territory YTD.
Japanese mandated managers performed best in June, returning 2.31%. Eurekahedge suggests this is related to the signals sent by Japan’s Government Pension Investment Fund that it may increase its allocations to domestic equities.
Strong performance by hedge funds in Asia ex-Japan in June (though not quite as strong as in May) indicates that post-election euphoria in India has continued, and that China’s latest PMI numbers represent a relief. Meanwhile, new fund launches in Asia were markedly less in the first half of 2014 than they had been in the first half of 2013.
Alex Turnbull, son of Federal Communications Minister Malcolm Turnbull, is planning a Singapore-based hedge fund, said people with knowledge of the matter to the Sydney Morning Herald.
Turnbull, who has been an executive director of Goldman Sachs Group's special situations group, will be the chief investment officer of Keshik Capital, said the people who asked not to be identified. The fund will be focused on Asia with flexibility to invest globally. It may start as early as January and will invest in equity and credit, including convertible bonds, they said.
Keshik will be at least the third hedge-fund startup that is tapping Asian opportunities in recent years and involves a former member of the Goldman Sachs unit. The special situations group, known as SSG, invests in distressed debt and companies. It's part of Goldman Sachs's investing and lending operations, which generated USD4.3 billion ($4.6 billion) of pretax earnings last year, the most of the New York-based bank's four business segments.
Turnbull, who is based in Singapore, worked for SSG for four years until earlier this year, according to his LinkedIn profile. SSG's investments include holdings in Japan's largest golf-course operator Accordia Golf and pizza-chain Sbarro.
