Hedge funds enjoy record year in 2013… Former HSBC banker to start global hedge fund…
The Eurekahedge Hedge Fund Index was up 0.99 per cent in December, bringing the yearly returns for 2013 to 8.02 per cent. The MSCI World Index returned 1.67 per cent in December and was up 21.1 per cent for 2013.
Hedge funds remained in positive territory throughout the year, suffering a setback in June and August of 2013 as uncertainty loomed in the underlying markets following the Fed's 'taper scare.' Overall, hedge fund managers were up 2.53 per cent in the first half and 5.36 per cent in the second half of the year. Most regional mandates ended the year on a positive note, with Japan and Greater China focused hedge funds outshining the rest. Among investment strategies, distressed debt investing hedge funds were the best performers during the year, with long short equity and event driven strategies also delivering strong returns.
In terms of capital raising, North American fund managers were the most successful attracting USD73.6 billion of asset inflows during the year, followed by European and Asia ex-Japan fund managers who saw capital allocations of USD62.4 billion and USD11.0 billion in 2013.
Funds of hedge funds had their best year relative to the hedge fund industry on record.
Hedge fund returns were up for the fourth consecutive month with the Eurekahedge Hedge Fund Index gaining 0.99 per cent in December and 8.02 per cent overall in 2013
Total assets grew by USD228.8 billion – the fastest annual growth on record since 2007 with total assets under management of the hedge fund industry standing at a historic high of USD2.01 trillion
Hedge fund managers attracted USD146.1 billion in the form of net capital allocations during the year – an impressive turnaround given the industry saw a total of USD109.6 billion of net asset flows in the previous three years combined
Hedge funds focused on Asia Pacific realised the best returns and were up 15.3 per cent in 2013 with Japan and Greater China focused hedge funds delivering the best regional results up 25.7 per cent and 19.3 per cent respectively.
The Mizuho-Eurekahedge Index, an asset-weighted index, finished the year with gains of 6.63 per cent indicating that the larger funds slightly underperformed the small and medium sized funds.
Distressed debt hedge funds delivered the strongest performance among all strategies, gaining 16.8 per cent in 2013, while long/short equities hedge funds were up 14.3 per cent followed by event driven hedge funds which gained 11.3 per cent during the year
The Eurekahedge Fund of Funds Index was up 7.79 per cent, marginally behind hedge funds as multi-managers posted their best performance since 2009
Fund of hedge funds managers' are now tracking hedge funds more closely than ever with multi-managers outperforming underlying hedge funds in 6 out of the 12 months this year. A combination of reduced fees, increased diversification and the weeding out of underperforming fund of funds has rendered the multi-manager model more agile than ever.
Reuters reports that a Hong Kong court has ordered hedge fund Tiger Asia Management LLC, founder Bill Sung Kook Hwang and head trader Raymond Park to pay HKD45 million to around 1,800 investors affected by insider trading involving two stocks.
The ruling is the second this month in cases brought by the Securities and Futures Commission SFC.L forcing an individual or firm to pay investors money they lost out on because of insider trading.
Tiger Asia had admitted engaging in insider trading in 2008 and 2009 in the Hong Kong-listed stocks of China Construction Bank Corp and Bank of China Ltd.
"The restoration amount represents the difference between the actual price of BOC and CCB shares sold by Tiger Asia and the value of those shares taking into account the inside information known to Tiger Asia," the SFC said in a statement on Friday.
In December last year, Tiger Asia admitted to charges of wire fraud, brought by the U.S. Securities and Exchange Commission (SEC), in connection with the trades in the Chinese bank shares that the SFC alleged were illegal.
The SEC also charged head trader Park with insider trading. Park and fund founder Hwang agreed to settle the SEC's charges without admitting or denying them.
Tiger Asia in August last year said it would return money entrusted to it by investors by the end that month as the SFC investigation in Hong Kong was likely to be prolonged.
Earlier this month, a former Morgan Stanley banker convicted of insider trading was ordered to pay more than 290 investors a total of HKD23.9 million.
Equity-related hedge fund strategies posted their best annual performance in four years in 2013 as the HFRX Equity Hedge Index posted a gain of +1.25 per cent for December and ended 2013 with a gain of +11.14 per cent, data tracker Hedge Funds Research said in its December 2013 performance report.
It added that the HFRX Market Directional Index gained +0.89 per cent for December and +9.50 per cent for 2013, also the best Index annual performance since 2009. The HFRX Global Hedge Fund Index gained +0.56 per cent for December and +6.72 per cent for 2013.
"HFRX Fundamental Value Index gained +1.39 per cent for the month, gaining +16.1 per cent for the year, the best annual performance since 2005. HFRX Fundamental Growth Index gained +1.21 per cent for the month, with contributions from Emerging Asia and Global Healthcare, while HFRX Market Neutral Index gained +0.17 per cent for the month, ending the year with a 3rd consecutive monthly gain," the report added.
Bloomberg writes that Roshan Padamadan, a former product specialist at HSBC Holdings Plc is starting a hedge fund that will invest in liquid securities including stocks, bonds and derivatives globally.
Luminance Global Fund will invest in companies “where the business models survive in almost every scenario,” said Padamadan, who will run the fund. It will start trading on Jan. 2 with initial capital of about USD2 million that Padamadan said he expects to rise to USD4 million in about three months.
Padamadan is starting the fund with Swiss-Asia Financial Services Pte, which will provide non-investment services to help it cut startup costs and attract investors. Hedge-fund startups are turning to platforms like Swiss-Asia after funds-of-funds, which allocate money to various managers, lost assets following the global financial crisis in 2008, hampering smaller hedge funds’ ability to raise capital.
The USD2 trillion global industry is facing pressure to cut fees to attract investors amid rising costs of complying with regulations and client demand.
Luminance Global Fund will charge a 25 per cent performance fee, with the first payment due after three years, said Padamadan and product specialist Sunand Razu. They will not charge a management fee, they said.
Padamadan previously worked for HSBC for seven years, including in India, London and Singapore, across corporate credit analysis, sell-side research and asset management, he said. In Singapore, he worked as a product specialist in the team of Sanjiv Duggal, the manager of the Luxembourg-based HSBC GIF Indian Equity Fund.
Luminance Global seeks absolute returns by picking securities it regards as over- or undervalued and uses derivatives to cushion the risk of its investments, Padamadan said. The fund uses futures and options to calibrate risk, he said.