Progress report
An assessment of hedge fund YTD performance in the face of renewed fears for a potential eurozone crash Read More
14/12/2011
Comment: Matt Mullarkey
Matt Mullarkey is a senior advisor at Aksia
With the end of the year approaching fast, Aksia’s 2012 Hedge Fund Manager Survey crystallises a number of key themes of the past 12 months. Managers provided candid responses to questions regarding global issues, predictions for markets in 2012 and industry practices. The results show some common viewpoints, but also highlight a number of areas where managers’ responses ran against conventional wisdom.
Our survey was conducted over recent weeks and comprises the views of 125 institutional-calibre hedge funds accounting for approximately US$800bn of assets under management – more than one-third of total global hedge fund industry assets under management.
From a macro-economic perspective, managers expressed a lack of confidence in policy and policymakers. When asked to grade policymakers’ performance in handling the financial crisis, managers gave near failing grades to the US Congress, EU leaders and the US president. The US Federal Reserve received the best grade, garnering a ‘B’ and was the only one to receive a significant number of ‘A’ votes (18% versus 0% for the aforementioned group). However, the Fed received less support for its ‘Operation Twist’, with 80% of fund managers believing it will ultimately fail to affect financial markets.
Managers expressed serious concerns regarding Europe. On the most pressing issues in Europe, 42% of hedge fund managers see a ‘real possibility’ of default or restructure by Italy and Spain. Similarly, 60% of managers also see the possibility of Greece having to exit the euro. As for monetary policy, respondents were overwhelmingly supportive of further easing, with 94% in agreement.
For the markets in general, managers’ responses suggest they expect markets to be range-bound over the next year. Fifty-seven percent believed macro-factors will drive returns in 2012. While managers certainly believed in their own strategies, global macro was the top choice as the likely best performing strategy in 2012.
Some of the key findings included views on new financial regulations, the high correlation environment, counterparty risk management and transparency.
Most hedge fund managers see new financial regulations as “irrelevant” to their strategy (58%), while 21% believe they will actually “help” their strategy. The implementation of the Volcker Rule, Dodd-Frank and Basel III will limit banks’ proprietary trading and affect banks’ regulatory capital requirements. This may provide opportunities for relative value and event driven managers, as 40% and 30% of them, respectively, responded that new regulations help their strategy.
While managers and investors alike struggle with stubbornly high correlations among assets and markets, it is interesting to see some managers actually finding opportunities in this environment; 45% of managers felt high correlations were a hindrance to their strategy, but 32% of respondents found opportunities. Fifty percent of event-driven managers thought high correlations would help their strategy.
Following the Lehman collapse, managers began to focus more on counterparty risk. Our survey asked managers that employed CDS spread triggers at which point they would begin to move balances away from counterparties. Interestingly, they generally begin to move balances once spreads get above the 400 basis point range. In recent months, spreads on major US and non-US dealer banks have begun to approach these levels.
Finally, 54% of managers said they report position level data to third-party risk aggregators. In addition, the results suggest a generational shift in industry transparency; 26% of funds less than two years old provide full portfolio disclosure to investors, against 9% of funds more than 10 years old. While the industry still has a long way to go, there appears to be a growing willingness to provide investors with better information, especially among more emerging hedge fund managers.
- Share
-
Text Size
Decrease text size
Increase text size
60 seconds with... Kenneth Turchin
CAN YOU DESCRIBE YOUR CURRENT ROLE?
I have worked in public accounting and hedge funds and in the past eight years have been selling middle- and back-office services to the alternate investment industry. My role is to build relationships with clients, teach them about SS&C’s products and services, and ensure seamless transactions every time the firm launches a new fund.
IF YOU WERE DOWN TO YOUR LAST £1,000, HOW WOULD YOU INVEST IT?
I would buy THREE shares in Apple and hope for a repeat 383% return in the next five years.
WHAT WOULD YOU DO IF YOU WERE IN PRESIDENT OBAMA’S SHOES?
That’s one pair of size 12 shoes I do not want to be in!
WHO WOULD PLAY YOU IF THEY MADE A MOVIE ABOUT YOUR FIRM?
Kevin Bacon. He is a versatile actor and the centre of the entertainment universe. I am in sales. Everyone in the industry would be linked to me in six steps or less. My client list would be ridiculous.
HFMWeek Daily Snapshot - 17 May
Today: Magnetar Capital subject of SEC probe; Paulson keen on CVR Energy following Icahn involvement; mini victory for US prosecutors in Rajat Gupta insider trading trial; and more...
SS&C wins Form PF mandate from $23bn Lone Pine
SS&C Technologies, the hedge fund administrator, has been mandated by $22.7bn Lone Pine Capital to provide its Form PF reporting solution, HFMWeek has learned.
Squeeze on fees continuing, according to State Street
Downward pressure on fees for hedge fund services such as administration, alongside an increased demand for more transparency on pricing, continues to be a defining industry characteristic, State Street executives said today.
Investor demand for CTAs is on the rise, says Agecroft Partners
Agecroft Partners is seeing widespread demand from institutional investors for Commodity Trading Advisors (CTAs), which is a dramatic change from the historical reluctance of many institutional investors and their consultants to allocate to this strategy.
Read More07/06/2012
UK: Impact of the AIFMD - the real story
Join us and our panel of experts for HFMWeek's Subscribers' Club June's UK breakfast briefing, 'Impact…
31/05/2012
US: Family Offices
The next US HFMWeek Subscribers' Club breakfast, will take place on Thursday May 31. Join us and…
02/02/2011
European Hedge Fund Services Awards 2012
HFMWeek's European Hedge Fund Services Awards are designed to recognise companies that have outperformed...
Be the first to comment on this article!