21/10/2010 Author: Shannon Hawthorne

Secondary market gains 5% in September

The secondary hedge fund market gained 5% in September, according to Hedgebay's Global Hedge Fund Secondary Market Index, as sellers attempted to harness short-term liquidity to meet quarterly redemption demands.

An increase in trading saw the index increase to 78.93% last month, a rise driven in part by return of near-par trading, with some trades reaching 100% of Net Asset Value (Nav).

Investors also moved funds in all available asset classes in September, with private equity and credit strategies remaining the most popular.

"With the end of the third quarter nearing, the scramble for liquidity meant that sellers were willing to settle for slightly reduced prices for assets in any class," said Elias Tueta, co-founder of Hedgebay, in a statement. "The number of high quality hedge fund shares still on the market means that there will always be willing buyers for these reduced assets, and this sparked much of the near par trading we saw in September."

The Hedgebay Illiquid Asset Index, which measures trading in gated or suspended funds, also increased from 44.28% to 47.58% from August to September.

The relatively small increase suggests some stability may be returning to the sector after a notably volatile year which saw a percentage swing of nearly 50% between May and June.

"Some price stability would be extremely welcome, and this month's rise is certainly a step in that direction," said Tueta. "Given the volatility we have seen so far this year, however, it would be premature to draw any firm conclusions."