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Asia after the global storm
by Huichen Chou 29 May 2009
Huichen Chou looks at how Asian investors have been impacted by the economic crisis and what they are doing to lessen its impact
The tempestuous storm of global financial turmoil sweeping the world has definitely not left Asia unharmed. Exposure to international and domestic equities has resulted in detriments to Asian institutional investors as a whole, including government pension reserve funds.
According to FTSE World Indices in 2008, the Pacific countries excluding Japan, China and Hong Kong suffered from 50.4% equity losses in dollar terms, while Japan and Hong Kong posted 42.0% and 50.1% equity drop respectively within the same period.
Against the backdrop of bleak equity capital market data, Fidelity International's managing director Asia Chris Ryan states that the region's national pension funds have been relatively less impaired by the global financial crisis compared with their Western counterparts. This is due to their substantial allocations in fixed income and the region's favourable credit environment in the past 18 months.
The Citigroup World Government Bond Indices in 2008 recorded 27.8% gains in dollar terms for the government bond returns in Japan. Meanwhile, Dealogic data illustrated that US Treasuries excluding municipal bonds posted 102% on-year volume gains in 2008. In Asia, the domestic bonds of Japan, South Korea and China priced within the year surged 11%, 38.5% and 123% in volume compared to 2007.
To shore up recessive domestic economies, governments in countries like Korea, Japan, China, Taiwan and Australia are tasked to implement economic stimulus plans, part of which being infrastructure expenditures to kick-start development projects and create jobs. Relatively aggressive government pension schemes like National Pension Service (NPS) in Korea, the world's fifth largest pension plan and National Social Security Fund (NSSF) in China both have their roles to play in these government-driven initiatives through allocating assets to facilitate infrastructure developments.
NSSF reached a Y5bn (US$73m) agreement with China Development Bank in December on supporting infrastructure construction and livelihood improvement projects.
Meanwhile, NPS reached agreements during 2008 with private equity firms Blackstone, Oaktree Capital and MBK Partners to set aside an aggregate of US$9bn in alternative investments, such as infrastructure, real estate and other domestic investment projects.
To mitigate its vulnerability in equity exposure, NPS trims domestic and overseas equity investments in 2009 to 20.6% from the targeted 29.7%, with 17.0% and 3.6% being allocated in domestic and offshore equities respectively.
GPIF under review
Japan's Government Pension Investment Fund (GPIF), the world's largest pension system, currently allocates 73.01% and 10.47% of assets in domestic bonds and equities respectively with remaining assets roughly divided equally by offshore equities and bonds, leaving its portfolio unchanged as the world's second largest economy suffers from its worst economic performance in 35 years.
Under policies of reviewing investment performance every four years and implementing a new round of asset allocation decisions every five years, the fund will undergo a fresh portfolio restructuring in April 2010.
Topics pertaining to the new investment strategy currently under evaluation include an assessment of its very first venture into alternatives, such as real estate, according to JP Morgan Asset Management Japan's head of strategic investment advisory group Hidenori Suzuki.
"GPIF is very conservative in changing its portfolio. Regardless the outcome of investment decisions, allocation weight in any new classes will be limited, given the huge size of GPIF's assets under management," he said.
Despite any temporary portfolio restructuring in national pension plans following the crisis, mandate managers believe investing internationally will remain the trend.
"The financial turmoil has driven some national pension reserve funds in Asia to review their investment policies and reassess earlier decisions to allocate funds internationally. At the least we expect previous decision to appoint managers will be reviewed in context of the fluctuating circumstances in the financial markets and the reaction by some fund managers to restructure or reduce resources," said Mark Konyn, chief executive officer for RCM Asia Pacific.
"As a result appointments of fund managers for international equity mandates have been deferred for the time being. Nevertheless, we believe and anticipate that the fundamental long-term commitment to invest internationally will remain - it has become a question of timing," he added.
As a general direction, some government pension funds have gradually increased their equity allocation in the past two years compared with the low equity exposure 10 years ago, Ryan of Fidelity International observed.
Fixed income
In the fixed income arena, mandate managers deem US Treasuries to have been and will be a substantial portion in the portfolios of these large funds.
"US Treasuries continue to be a large class in the fixed income portfolios, which makes sense for a number of reasons. A large bulk of Asian revenues is denominated in US dollar because the US is the largest export destination for many Asian economies and exports are chiefly denominated in the US currency. Crucial commodities, be they crude oil or iron ore, are also traded in dollar as well," Ryan illustrated.
"Having said that, many funds are also invested in Euro-denominated sovereign bonds and high-yield Euro credits and this is the case with many institutions such as South Korea's National Pension Service which is arguably one of the more sophisticated investors in the region. They have successfully shifted their offshore fixed income portfolios beyond US Treasuries, resulting mainly from Korea increasing its exports to Europe in the past five years," he added.
A trend worth noting in Asia is a gradual increase of intraregional trade, which money managers argued would affect these pension schemes' fixed income allocation to a certain extent.
Chris Ryan of Fidelity International said: "Intraregional trade has grown strongly in the last two decades and now represents around 20% of total trade for most countries in the region. The other 80% of the trade picture is still with the developed economies of the US and Europe. We see a stronger commitment to regional equity and bond investments forming as a result of these increasing flows around the region and, as a result, better Asian support for local equity markets and deepening Asian local and hard currency bond markets. This should in turn reduce the proportion of ‘hot money' in Asian markets, leading to great stability in the long run."
The crisis also triggered Asian pension funds to address the transparency issue and scrutinise their investments in alternatives.
"One consequence of the problems with alternatives is that pension fund governance will require greater transparency from the managers selected. In conversation with various pension sponsors this will likely see the role of fund of funds reduce and for those plans that can support the governance, single strategy funds will replace," Konyn of RCM argued.
Other investments
On the private equity front, Watson Wyatt's head of investment consulting for Asia Pacific Naomi Denning pointed out that these investments are subject to limits on money they will take on to invest and finding viable investment targets. The larger government pension schemes with investment teams are scouring viable opportunities themselves as well as funding PE firms as funds of funds, she added.
In terms of socially responsible investments, Asia pensions at present are still going through the process of getting portfolios globally invested, which is prioritised over any such investments, albeit that they are deemed by some as offering attractive opportunities."
The demographic trends and future liabilities Asian economies face will determine the direction and asset management approaches of their respective national pension schemes in the long run said Konyn of RCM.
"Japan is an aged society and its retirement investors lack sufficient risk budget to achieve higher returns-return objectives that have been set in easier and more supportive times. The low interest rate and deflation at home oblige the Japanese approaching retirement to save more and spend less. This is reducing economic activity at a time when the economy is in recession and therefore investments continue to disappoint," he said.
"Many pension funds had turned to alternative managers offering absolute return strategies. However many have been disappointed and as a result fund of fund strategies may feature less going forward."
Konyn also point out that Korea is in the process of accumulating savings to fulfill long term requirements although the demographic challenges continue to build.
"In the case of China, this emerging market is different to others in that rather than getting rich and than getting old, China has got old before it has got rich. China has high savings rates and the key will be to mobilise these savings and apply them productively and thereby reduce the burden to meet pension liabilities on the state," Konyn elaborated.
Denning of Watson Wyatt said: "The challenge facing Asia pension funds is how to react to the extreme markets, with one issue being whether to rebalance their equity allocation. Another issue that defined contribution funds need to address is the provision of lifecycle defined contribution options, similar to the target-date retirement funds in the US or the lifecycle funds in the UK which gradually decrease risk as they approach the retirement date. These are not widely available in Asia despite talks in some markets."
Denning also pointed out that national government-run pension funds are not prominent in the West in the way they are in Asia. Sovereign wealth funds (SWFs) like national pension reserve funds throughout Asia are huge and still relatively new to the global investment arena. With their sheer size, getting money to work is a challenge.
Meanwhile, external managers often have limited capacity to take on assets without detracting from their ability to add value. The SWFs are increasingly aware of this challenge and therefore will invest some assets internally or passively. They also have to seek layers of approval to get decisions made and operate under high scrutiny which can make outsourcing quite a slow process, Denning said.
Asset allocation
During 2009, Fidelity's Ryan argued that several forces would drive the asset allocation strategies of government pension funds in Asia.
"The economic stimulus plans already announced by Asian countries will trigger higher inflation which will persist for years and this will drive a move to investing in more real assets such as shares, real estate and private equity. But it will take time to get the right exposures to these asset classes so this will be a long-term process," he said.
Across Asia excess savings have been a consequence of the region's dependency on exports and a reduced risk appetite following the Asian financial crisis. As a result, it is expected that currencies will depreciate as the savings pools will shrink in dollar terms, Konyn of RCM argued.
"This trend will extend to Japan where the reversal of the carry-trade has helped the yen to stay strong despite clear signs of economic weakness. More recently the yen has weakened and we expect the trend to continue for 2009, and across the region. This will impact the attitude to invest internationally."
Sunday, May 31, 2009
Comment: Funds of hedge funds defy predictions of extinction
Fri, 29 May 2009, 06:00
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(source: http://www.hedgeweek.com/articles/detail.jsp?content_id=333227)
Funds of hedge funds were widely predicted to become one of the principal casualties of last year's annus horribilis for the hedge fund industry. While most hedge fund indices reported average declines in 2008 of up to 20 per cent, fund of funds benchmarks did even worse.
That double layer of fees, it turned out, did not buy sufficient diversification to shield investors from hedge fund managers' miserable performance; investors found themselves deprived of liquidity because fund of fund managers' were unable to redeem underlying investments; funds of funds that had leveraged up to boost returns found it was losses that had been turbo-charged; and to cap it all some managers had placed significant slugs of their investors' money with Bernard Madoff.
The demise of funds of hedge funds has been forecast for years, prompted by the lower fees and supposedly superior performance of multistrategy funds as an alternative as well as the increasing sophistication of institutional investors who, it was predicted, would shift their capital from funds of funds to single-manager vehicles as they became more comfortable and knowledgeable about alternative investments. Surely last year's slump would deliver the coup de grâce?
It remains early days, but it seems that the death of funds of hedge funds may have been greatly exaggerated. Many funds of funds ran into trouble last year, of course, but anecdotal evidence suggests that investors are often willing to go along with restructuring proposals rather than settle for grabbing what they can from the wreckage. Last year's outflows of capital have slowed to a trickle, and there are even reports of the odd new fund of funds being launched.
Why should this be? A lot of the lustre came off multistrategy funds last year. By some reckonings they underperformed both funds of hedge funds and single-manager funds; certainly there was little evidence of consistent ability to reallocate capital successfully in response to market conditions. At the same time, the events of 2008 did little to reassure smaller institutions in particular about their ability to make their own choices of strategy and manager.
So there still seems to be a place for funds that offer somewhat diversified exposure to the hedge fund universe, although investors will be demanding greater evidence of due diligence on underlying managers and may well require fund of funds managers to get by on a lower level of fees.
Put together, these trends point to consolidation in the sector, as only managers with a substantial asset base will have the resources to research and investigate underlying funds with the thoroughness that will be required. Many members of Switzerland's substantial fund of funds industry, much of which consists of vehicles with less than USD100m in assets under management, will need to seek merger partners to survive, according to Peter Meier, head of the centre for alternative investments and risk management at the Zurich University of Applied Science.
Swiss fund of funds do face problems that are not universal in the industry; some of them have extremely low minimum investment thresholds, which bring them within the ambit of more onerous and constrictive retail investment regulation. Fund of funds managers as a whole are facing up to significant changes to their business models as they seek to regain investors' trust and also to start earning the level of fees required for their firms to thrive. Still, it's better than the alternative.
Fri, 29 May 2009, 06:00
Email Article Print Article PDF Article
(source: http://www.hedgeweek.com/articles/detail.jsp?content_id=333227)
Funds of hedge funds were widely predicted to become one of the principal casualties of last year's annus horribilis for the hedge fund industry. While most hedge fund indices reported average declines in 2008 of up to 20 per cent, fund of funds benchmarks did even worse.
That double layer of fees, it turned out, did not buy sufficient diversification to shield investors from hedge fund managers' miserable performance; investors found themselves deprived of liquidity because fund of fund managers' were unable to redeem underlying investments; funds of funds that had leveraged up to boost returns found it was losses that had been turbo-charged; and to cap it all some managers had placed significant slugs of their investors' money with Bernard Madoff.
The demise of funds of hedge funds has been forecast for years, prompted by the lower fees and supposedly superior performance of multistrategy funds as an alternative as well as the increasing sophistication of institutional investors who, it was predicted, would shift their capital from funds of funds to single-manager vehicles as they became more comfortable and knowledgeable about alternative investments. Surely last year's slump would deliver the coup de grâce?
It remains early days, but it seems that the death of funds of hedge funds may have been greatly exaggerated. Many funds of funds ran into trouble last year, of course, but anecdotal evidence suggests that investors are often willing to go along with restructuring proposals rather than settle for grabbing what they can from the wreckage. Last year's outflows of capital have slowed to a trickle, and there are even reports of the odd new fund of funds being launched.
Why should this be? A lot of the lustre came off multistrategy funds last year. By some reckonings they underperformed both funds of hedge funds and single-manager funds; certainly there was little evidence of consistent ability to reallocate capital successfully in response to market conditions. At the same time, the events of 2008 did little to reassure smaller institutions in particular about their ability to make their own choices of strategy and manager.
So there still seems to be a place for funds that offer somewhat diversified exposure to the hedge fund universe, although investors will be demanding greater evidence of due diligence on underlying managers and may well require fund of funds managers to get by on a lower level of fees.
Put together, these trends point to consolidation in the sector, as only managers with a substantial asset base will have the resources to research and investigate underlying funds with the thoroughness that will be required. Many members of Switzerland's substantial fund of funds industry, much of which consists of vehicles with less than USD100m in assets under management, will need to seek merger partners to survive, according to Peter Meier, head of the centre for alternative investments and risk management at the Zurich University of Applied Science.
Swiss fund of funds do face problems that are not universal in the industry; some of them have extremely low minimum investment thresholds, which bring them within the ambit of more onerous and constrictive retail investment regulation. Fund of funds managers as a whole are facing up to significant changes to their business models as they seek to regain investors' trust and also to start earning the level of fees required for their firms to thrive. Still, it's better than the alternative.
Friday, May 29, 2009
New Mexico Eyes FOFs
Bob Jacksha The $7 billion New Mexico Educational Retirement Board is considering seeking managers for bank loans and funds of hedge funds, as first reported by iisearches. The exact mandate sizes have not been determined. NEPC, the fund's consultant, has been advising clients to tap into a variety of credit strategies, including bank loans, to take advantage of the market dislocation.
In the funds of funds space, New Mexico terminated Austin Capital Management from a $113 million strategy due to its exposure to Bernard Madoff. The firm is now closing due to steep redemptions (MML, 5/4). The fund is also getting out of its $44 million commitment to Topiary Fund Management, DB Advisors' funds of funds unit, ...
from moneymanagementletter.com
In the funds of funds space, New Mexico terminated Austin Capital Management from a $113 million strategy due to its exposure to Bernard Madoff. The firm is now closing due to steep redemptions (MML, 5/4). The fund is also getting out of its $44 million commitment to Topiary Fund Management, DB Advisors' funds of funds unit, ...
from moneymanagementletter.com
Fund of Closed-End Funds
An Income Stream That Spreads the Risk (From Smart Money)
Since I highlighted some of my favorite ideas for income last week, yields on government bonds have soared, pushing prices on many traditional bond and bond equivalents sharply lower. Thankfully, the floating rate, foreign currency and muni funds we mentioned have generally held up.
Even given the uncertainty over interest rates, the economy and continued government intervention in the economy, I’ll add one more idea to the list. Cohen & Steers Closed-End Opportunity Fund (FOF: 9.78, +0.10, +1.03%), a unique closed-end “fund-of-funds” that holds stakes in no fewer than 95 different closed-end income-oriented funds, all of which pay regular dividends. To that end, the investor in FOF achieves two levels of diversification, owning one fund that owns literally dozens of funds, each with its own portfolio of investments.
Cohen & Steers Closed-End Opportunity Fund (FOF)
Source: Cohen & Steers
Covered-call funds, which sell options on a portfolio of stocks, account for its biggest allocation at approximately 15%, along with tax-advantaged equity funds, meaning the FOF tends to generally correlate with the broad stock market. The difference is the income – an investment in the S&P 500 will yield less than 2.5% while at current levels FOF yields more than 11%, thanks to the fund’s investment in high yield, convertible and preferred funds. Real estate, senior loan, utility and master-limited partnerships are a few of the other asset classes represented. It truly has a little bit of everything that throws off income.
Moreover, FOF itself trades at a 7% discount to its NAV – a chasm likely to narrow should liquidity and market confidence stabilize.
Income investors are essentially bankers and thus should look to build bulletproof portfolios based around a range of various types of securities and risks. FOF offers a highly diversified portfolio consisting of a wide range of income-oriented ideas. This is by no means a bond equivalent and carries plenty of market risk. But for a total-return investor hunting for yield, this is certainly one to consider
Since I highlighted some of my favorite ideas for income last week, yields on government bonds have soared, pushing prices on many traditional bond and bond equivalents sharply lower. Thankfully, the floating rate, foreign currency and muni funds we mentioned have generally held up.
Even given the uncertainty over interest rates, the economy and continued government intervention in the economy, I’ll add one more idea to the list. Cohen & Steers Closed-End Opportunity Fund (FOF: 9.78, +0.10, +1.03%), a unique closed-end “fund-of-funds” that holds stakes in no fewer than 95 different closed-end income-oriented funds, all of which pay regular dividends. To that end, the investor in FOF achieves two levels of diversification, owning one fund that owns literally dozens of funds, each with its own portfolio of investments.
Cohen & Steers Closed-End Opportunity Fund (FOF)
Source: Cohen & Steers
Covered-call funds, which sell options on a portfolio of stocks, account for its biggest allocation at approximately 15%, along with tax-advantaged equity funds, meaning the FOF tends to generally correlate with the broad stock market. The difference is the income – an investment in the S&P 500 will yield less than 2.5% while at current levels FOF yields more than 11%, thanks to the fund’s investment in high yield, convertible and preferred funds. Real estate, senior loan, utility and master-limited partnerships are a few of the other asset classes represented. It truly has a little bit of everything that throws off income.
Moreover, FOF itself trades at a 7% discount to its NAV – a chasm likely to narrow should liquidity and market confidence stabilize.
Income investors are essentially bankers and thus should look to build bulletproof portfolios based around a range of various types of securities and risks. FOF offers a highly diversified portfolio consisting of a wide range of income-oriented ideas. This is by no means a bond equivalent and carries plenty of market risk. But for a total-return investor hunting for yield, this is certainly one to consider
More money going into FOFs
Over the past two months, fund-of-funds managers have closed on roughly $5.1 billion in fresh capital to invest in private equity, venture capital and real estate vehicles. Additionally, three firms have reportedly begun raising around $2 billion for the sector in recent weeks.
The largest closings were made by Siguler Guff Co. LLC, Horsley Bridge Partners, Morgan Stanley Investment Management and Abbott Capital Management, which all wrapped up $1 billion or more.
Siguler Guff wrapped up $2.4 billion to back private equity firms investing in distressed securities. (The Deal Pipeline subscribers can read more here.) San Francisco's Horsley Bridge secured $1.54 billion for venture capital and small LBO shops in Asia and Europe, according to VentureWire. The firm is reportedly a limited partner for U.S. venture capital heavyweights, including Kleiner Perkins Caufield and Byers and Foundation Capital, and the new vehicle follows a $1.76 billion U.S.-focused fund that closed in June 2008, according to Venturebeat.
Morgan Stanley Private Markets Fund IV closed 15% higher than its 2006 predecessor fund and will bankroll LBO, venture capital and special situations managers primarily in the U.S., Western Europe and emerging private equity markets.
Likewise, the $1 billion Abbott Capital Private Equity Fund VI will be contributing to buyout, special situations, venture capital and growth equity funds in the U.S. and other developed markets. Abbott now has around $6.6 billion invested in 200 funds, according to AltAssets.
There are also a number of firms out marketing new vehicles.
With the completion of a breakaway from Lehman Brothers Holdings Inc., Neuberger Berman began marketing a new Crossroads fund-of-funds with a $1.25 billion target. The firm told Reuters that early indications are that investors are already prepared to ante up $500 million for the fund.
Infrastructure Development Finance Co. is also launching a private equity fund-of-funds unit out of its Singapore office. The vehicle is targeting $500 million to bankroll LBO shops, focused on Asian emerging markets, particularly China and India, Dow Jones Newswires reported.
Rounding things out is Henderson Global Investors, which is reportedly in the early stages of launching a North American commercial real estate fund-of-funds business, according to Real Estate Finance and Investment.
The largest closings were made by Siguler Guff Co. LLC, Horsley Bridge Partners, Morgan Stanley Investment Management and Abbott Capital Management, which all wrapped up $1 billion or more.
Siguler Guff wrapped up $2.4 billion to back private equity firms investing in distressed securities. (The Deal Pipeline subscribers can read more here.) San Francisco's Horsley Bridge secured $1.54 billion for venture capital and small LBO shops in Asia and Europe, according to VentureWire. The firm is reportedly a limited partner for U.S. venture capital heavyweights, including Kleiner Perkins Caufield and Byers and Foundation Capital, and the new vehicle follows a $1.76 billion U.S.-focused fund that closed in June 2008, according to Venturebeat.
Morgan Stanley Private Markets Fund IV closed 15% higher than its 2006 predecessor fund and will bankroll LBO, venture capital and special situations managers primarily in the U.S., Western Europe and emerging private equity markets.
Likewise, the $1 billion Abbott Capital Private Equity Fund VI will be contributing to buyout, special situations, venture capital and growth equity funds in the U.S. and other developed markets. Abbott now has around $6.6 billion invested in 200 funds, according to AltAssets.
There are also a number of firms out marketing new vehicles.
With the completion of a breakaway from Lehman Brothers Holdings Inc., Neuberger Berman began marketing a new Crossroads fund-of-funds with a $1.25 billion target. The firm told Reuters that early indications are that investors are already prepared to ante up $500 million for the fund.
Infrastructure Development Finance Co. is also launching a private equity fund-of-funds unit out of its Singapore office. The vehicle is targeting $500 million to bankroll LBO shops, focused on Asian emerging markets, particularly China and India, Dow Jones Newswires reported.
Rounding things out is Henderson Global Investors, which is reportedly in the early stages of launching a North American commercial real estate fund-of-funds business, according to Real Estate Finance and Investment.
Thursday, May 28, 2009
Reuters Screens Can Help You Make Money
from: http://www.winninginvesting.com/multex_screens.htm
Please Note: Reuters no longer offers the features described in this article.
“Many of the stocks on that list you recommended are teetering on bankruptcy. What were you thinking?” That was the gist of many emails I received after I described Reuters’ Contrarian Opportunities stock selection screen in this space just about a year ago.
Contrarian Opportunities is one of 19 stock selection screens designed by Reuters’ director of investment research, Marc Gerstein. Reuters (investor.reuters.com) runs the 19 screens, which it calls Reuters Select, daily, and lists the stocks turned up by each screen on its site. You have to register, but there is no charge to see the lists.
Reuters tracks the performance of each screen and makes the results available, both in summary form, and month-by-month since inception.
What got everyone’s attention was that, as of August 27, 2004, the stocks picked by Gerstein’s contrarian screen had racked up an eye-popping 729% cumulative gain since its inception in January 2000. By contrast, the overall market as gauged by the S&P 500 index, had lost 17% during the same period.
While Contrarian Opportunities did the best, several other screens had produced impressive results. In fact, every one of the 19 screens had beaten the market from January 2000 through August 2004.
Time For An UpdateWith reader’s comments still on my mind, last week, I checked to see how Contrarian Opportunities and Gerstein’s other screens had fared over the past year.
As of September 9, Contrarian Opportunities still led the field, but this time with an astonishing 1349% cumulative return. By the way, Reuters computes the returns assuming that each portfolio is rebalanced monthly, meaning that a new portfolio is selected every month.
Screen Categories Gerstein divides his screens into four categories, Growth, Value, Quality, and Sentiment. The Growth and Value categories each contain five screens emulating different variations of these relatively well-known selection strategies. Contrarian Opportunities is in the value category.
The Quality category includes four screens that look for stocks with strong fundamental characteristics. The Sentiment category includes five screens that look for stocks that are “in favor” based on factors such as insider buying or analysts’ ratings.
Lesser-Known Stocks from the Sentiment category was the second best performing screen with a 337% cumulative return. A value screen, Favored Value Plays, was a close third with a 330% return.
As was the case last year, each of Gerstein’s screens has not only been profitable since inception, every screen has soundly trounced both the S&P 500 and the Nasdaq.
Lower Risk Screens Despite its off-the-chart historical returns, in my view, the Contrarian Opportunities screen is too risky for serious money. While most of Gerstein’s screens produce lists of 30 to 50 stocks, the contrarian screen turns up far fewer. In fact, when I checked last Tuesday, it only listed only two stocks. Obviously, with only a few stocks, one clunker could sink the entire portfolio.
However, Gerstein’s remaining 18 screens produce consistent market-beating results, and to me, look relatively low-risk.
Find Reuters Select screens from Reuters Investing homepage by selecting Ideas & Screening and then Reuters Select. Click on Daily Results to see the current picks for each screen.
Check Performance The best way to evaluate a screen’s suitability for your needs is to check its monthly performance under different market conditions. You can do that by selecting Performance, and then click on Performance Details for a particular screen category to download a spreadsheet showing the cumulative returns by month for each screen since inception. Scroll past the cumulative returns to see the actual monthly returns.
By the way, Reuter’s cumulative returns are index values, not percentage returns. The index values are referenced to the January 28, 2000 starting value of 100. Subtract 100 from these values to get the actual percentage returns. You don’t have to make that adjustment when you look at the individual monthly returns.
Buying equal dollar amounts of the 30 to 50 stocks typically turned up by Gerstein’s screens may not be practical for many investors.
Even if you don’t buy all the stocks, the screens are a good source for investing ideas. Also, check out Gerstein’s screen descriptions. He explains his rationale for the screen and also describes the screening criteria in detail. Reading each one is like taking an investing course.
Gerstein’s screens have produced remarkable results over the years. It’s amazing that Reuters is still giving the lists away for free.published 9/18/05
from: http://www.winninginvesting.com/multex_screens.htm
Please Note: Reuters no longer offers the features described in this article.
“Many of the stocks on that list you recommended are teetering on bankruptcy. What were you thinking?” That was the gist of many emails I received after I described Reuters’ Contrarian Opportunities stock selection screen in this space just about a year ago.
Contrarian Opportunities is one of 19 stock selection screens designed by Reuters’ director of investment research, Marc Gerstein. Reuters (investor.reuters.com) runs the 19 screens, which it calls Reuters Select, daily, and lists the stocks turned up by each screen on its site. You have to register, but there is no charge to see the lists.
Reuters tracks the performance of each screen and makes the results available, both in summary form, and month-by-month since inception.
What got everyone’s attention was that, as of August 27, 2004, the stocks picked by Gerstein’s contrarian screen had racked up an eye-popping 729% cumulative gain since its inception in January 2000. By contrast, the overall market as gauged by the S&P 500 index, had lost 17% during the same period.
While Contrarian Opportunities did the best, several other screens had produced impressive results. In fact, every one of the 19 screens had beaten the market from January 2000 through August 2004.
Time For An UpdateWith reader’s comments still on my mind, last week, I checked to see how Contrarian Opportunities and Gerstein’s other screens had fared over the past year.
As of September 9, Contrarian Opportunities still led the field, but this time with an astonishing 1349% cumulative return. By the way, Reuters computes the returns assuming that each portfolio is rebalanced monthly, meaning that a new portfolio is selected every month.
Screen Categories Gerstein divides his screens into four categories, Growth, Value, Quality, and Sentiment. The Growth and Value categories each contain five screens emulating different variations of these relatively well-known selection strategies. Contrarian Opportunities is in the value category.
The Quality category includes four screens that look for stocks with strong fundamental characteristics. The Sentiment category includes five screens that look for stocks that are “in favor” based on factors such as insider buying or analysts’ ratings.
Lesser-Known Stocks from the Sentiment category was the second best performing screen with a 337% cumulative return. A value screen, Favored Value Plays, was a close third with a 330% return.
As was the case last year, each of Gerstein’s screens has not only been profitable since inception, every screen has soundly trounced both the S&P 500 and the Nasdaq.
Lower Risk Screens Despite its off-the-chart historical returns, in my view, the Contrarian Opportunities screen is too risky for serious money. While most of Gerstein’s screens produce lists of 30 to 50 stocks, the contrarian screen turns up far fewer. In fact, when I checked last Tuesday, it only listed only two stocks. Obviously, with only a few stocks, one clunker could sink the entire portfolio.
However, Gerstein’s remaining 18 screens produce consistent market-beating results, and to me, look relatively low-risk.
Find Reuters Select screens from Reuters Investing homepage by selecting Ideas & Screening and then Reuters Select. Click on Daily Results to see the current picks for each screen.
Check Performance The best way to evaluate a screen’s suitability for your needs is to check its monthly performance under different market conditions. You can do that by selecting Performance, and then click on Performance Details for a particular screen category to download a spreadsheet showing the cumulative returns by month for each screen since inception. Scroll past the cumulative returns to see the actual monthly returns.
By the way, Reuter’s cumulative returns are index values, not percentage returns. The index values are referenced to the January 28, 2000 starting value of 100. Subtract 100 from these values to get the actual percentage returns. You don’t have to make that adjustment when you look at the individual monthly returns.
Buying equal dollar amounts of the 30 to 50 stocks typically turned up by Gerstein’s screens may not be practical for many investors.
Even if you don’t buy all the stocks, the screens are a good source for investing ideas. Also, check out Gerstein’s screen descriptions. He explains his rationale for the screen and also describes the screening criteria in detail. Reading each one is like taking an investing course.
Gerstein’s screens have produced remarkable results over the years. It’s amazing that Reuters is still giving the lists away for free.published 9/18/05
Finnish Medical Foundation Enters Alternative Investments
Finnish Medical Foundation Enters Alternative Investments
posted by lexxe on Tuesday 26 May 2009 14:49 BST From Mandatewire - see full story (subscription required)
MandateWire reports: The EUR45.6m (GBP40m) Finnish Medical Foundation has made its first foray into alternative investments by making a 3.8% allocation to the asset class.
According to mandate-tracking service MandateWire, the foundation still mainly focuses on spreading its equity investments across different countries, but it has now taken up alternative investments as a new asset class with an initial EUR2m (GBP1.8m) investment.
“Diversification makes it possible to achieve the long-term target return,” said the foundation about its decision, but did not specify which particular alternative asset class it had invested in.
posted by lexxe on Tuesday 26 May 2009 14:49 BST From Mandatewire - see full story (subscription required)
MandateWire reports: The EUR45.6m (GBP40m) Finnish Medical Foundation has made its first foray into alternative investments by making a 3.8% allocation to the asset class.
According to mandate-tracking service MandateWire, the foundation still mainly focuses on spreading its equity investments across different countries, but it has now taken up alternative investments as a new asset class with an initial EUR2m (GBP1.8m) investment.
“Diversification makes it possible to achieve the long-term target return,” said the foundation about its decision, but did not specify which particular alternative asset class it had invested in.
27 May 2009 - James Rutter
(http://www.wealth-bulletin.com/home/content/1054286666/)
Renaissance for funds of funds exposed by crisis
Some investors might feel Banque Privée Edmond de Rothschild has a lot to answer for. The Swiss-based private bank, part of the Rothschild family empire, launched the world’s first fund of hedge funds 40 years ago to pool investments from its wealthy clients in a portfolio of hedge funds.
In recent years, funds of hedge funds became a cornerstone of many wealthy individuals’ portfolios. While credit was easy and hedge funds delivered the absolute returns they promised, it was a highly profitable business for fund providers and a decent enough bet for investors.
But last year the promised absolute returns became a distant dream for most investors. Moreover, the diversification across different funds that was meant to reduce risk instead exposed fault lines in due diligence as funds of hedge funds were revealed as investors in Bernard Madoff ’s fictional portfolios.
Others were caught out by fund blow-ups and failures. Investors who rushed to withdraw their money found some fund of funds managers putting up gates to prevent them exiting, claiming they didn’t have the cash to pay redemptions and would be forced to sell positions at huge discounts.
In the aftermath of last year’s carnage, it is unsurprising to find Alexandre Col, head of investment funds at Edmond de Rothschild, extolling the virtues of funds of hedge funds. He says: “Returns over the last 40 years show that it has always been useful to have an allocation to funds of hedge funds in a portfolio.”
Banque Privée Edmond de Rothschild, which has €8.4bn ($6.5bn) in its LCF Prifund range, has for many years regarded a 30% allocation to the sector as sensible which, concedes Col, is “at the high end”.
Last year, its flagship uncorrelated fund returned –15.7%, less than half the loss of most equity markets and better than the performance of the average single manager hedge fund but still a long way from positive territory.
Col says: “The biggest mistake today would be to allocate your portfolio based on what happened in September, October and November last year. That was a very specific time.”
Nevertheless, he accepts many investors who suffered large losses last year will not be returning any time soon. A recent study by Bank of New York Mellon and research firm Casey Quirk estimated that high net worth individuals accounted for 80% of hedge fund redemptions last year.
Col expects institutions to be bigger sellers this year. “A lot of private clients arrived too late and have lost money recently. They generally acted more quickly than pension funds and have already redeemed whereas institutions were slower to sell because of the committee decision-making process.”
While Edmond de Rothschild suffered redemptions last year, it had enough liquidity to pay investors on demand, avoiding side pockets (arrangements struck with individual investors outside the terms offered to others), suspensions and gates.
CHANGE
The crisis has, however, prompted a change in Col’s approach. Previously, he believed in having between 40 and 50 funds in a portfolio – quite a lot by some standards. The spread provided liquidity, mitigated risk and enabled investments in numerous niche strategies that could deliver good performance but only for smaller amounts.
“Currently I think the opposite and we are much more concentrated, because the world has changed,” he says. He has half the number of managers because niche strategies are illiquid and he regards smaller funds as more risky.
He also expects some of the most lucrative investment opportunities, particularly relating to distressed assets, to only be available to larger funds.
There is also a good chance the next year or two will be lucrative ones for the hedge funds that survived the credit crunch.
Research from Citi Private Bank shows hedge fund returns tend to be strong in the two years following a quarter of severe market stress.
The average annual return for the Hedge Fund Research composite in the two years following the third quarter of 1998, when Russia defaulted on its debts, was 24%, according to Citi.
Fewer funds, and less competition from the proprietary trading desks of investment banks, should help boost returns.
Of the strategies run by Banque Privée Edmond de Rothschild, Col expects the uncorrelated and long-short equity funds to perform best this year. “The trends aren’t there for the macro funds and commodities trading advisers.
Most of the big moves in interest rates and currencies have already happened. This year we are back to a stock-picking, trading approach, with short-term, sector views being rewarded.”
(http://www.wealth-bulletin.com/home/content/1054286666/)
Renaissance for funds of funds exposed by crisis
Some investors might feel Banque Privée Edmond de Rothschild has a lot to answer for. The Swiss-based private bank, part of the Rothschild family empire, launched the world’s first fund of hedge funds 40 years ago to pool investments from its wealthy clients in a portfolio of hedge funds.
In recent years, funds of hedge funds became a cornerstone of many wealthy individuals’ portfolios. While credit was easy and hedge funds delivered the absolute returns they promised, it was a highly profitable business for fund providers and a decent enough bet for investors.
But last year the promised absolute returns became a distant dream for most investors. Moreover, the diversification across different funds that was meant to reduce risk instead exposed fault lines in due diligence as funds of hedge funds were revealed as investors in Bernard Madoff ’s fictional portfolios.
Others were caught out by fund blow-ups and failures. Investors who rushed to withdraw their money found some fund of funds managers putting up gates to prevent them exiting, claiming they didn’t have the cash to pay redemptions and would be forced to sell positions at huge discounts.
In the aftermath of last year’s carnage, it is unsurprising to find Alexandre Col, head of investment funds at Edmond de Rothschild, extolling the virtues of funds of hedge funds. He says: “Returns over the last 40 years show that it has always been useful to have an allocation to funds of hedge funds in a portfolio.”
Banque Privée Edmond de Rothschild, which has €8.4bn ($6.5bn) in its LCF Prifund range, has for many years regarded a 30% allocation to the sector as sensible which, concedes Col, is “at the high end”.
Last year, its flagship uncorrelated fund returned –15.7%, less than half the loss of most equity markets and better than the performance of the average single manager hedge fund but still a long way from positive territory.
Col says: “The biggest mistake today would be to allocate your portfolio based on what happened in September, October and November last year. That was a very specific time.”
Nevertheless, he accepts many investors who suffered large losses last year will not be returning any time soon. A recent study by Bank of New York Mellon and research firm Casey Quirk estimated that high net worth individuals accounted for 80% of hedge fund redemptions last year.
Col expects institutions to be bigger sellers this year. “A lot of private clients arrived too late and have lost money recently. They generally acted more quickly than pension funds and have already redeemed whereas institutions were slower to sell because of the committee decision-making process.”
While Edmond de Rothschild suffered redemptions last year, it had enough liquidity to pay investors on demand, avoiding side pockets (arrangements struck with individual investors outside the terms offered to others), suspensions and gates.
CHANGE
The crisis has, however, prompted a change in Col’s approach. Previously, he believed in having between 40 and 50 funds in a portfolio – quite a lot by some standards. The spread provided liquidity, mitigated risk and enabled investments in numerous niche strategies that could deliver good performance but only for smaller amounts.
“Currently I think the opposite and we are much more concentrated, because the world has changed,” he says. He has half the number of managers because niche strategies are illiquid and he regards smaller funds as more risky.
He also expects some of the most lucrative investment opportunities, particularly relating to distressed assets, to only be available to larger funds.
There is also a good chance the next year or two will be lucrative ones for the hedge funds that survived the credit crunch.
Research from Citi Private Bank shows hedge fund returns tend to be strong in the two years following a quarter of severe market stress.
The average annual return for the Hedge Fund Research composite in the two years following the third quarter of 1998, when Russia defaulted on its debts, was 24%, according to Citi.
Fewer funds, and less competition from the proprietary trading desks of investment banks, should help boost returns.
Of the strategies run by Banque Privée Edmond de Rothschild, Col expects the uncorrelated and long-short equity funds to perform best this year. “The trends aren’t there for the macro funds and commodities trading advisers.
Most of the big moves in interest rates and currencies have already happened. This year we are back to a stock-picking, trading approach, with short-term, sector views being rewarded.”
Wednesday, May 27, 2009
NY Pension clips FOFs to USD500m from USD5b
NY pension clips fund of funds stakes to $500 mln
By: AFX 26 May 2009 03:49 PM ET
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By Joan Gralla NEW YORK, May 26 (Reuters) - New York state's pension fund has cut its so-called fund of funds investments to about $500 million from $5 billion since January 2008, after deciding direct investments were preferable, a spokesman said Tuesday. Fund of funds invest money in hedge funds on behalf of their investors, and they helped the state gain access to "blue chip" funds when former Comptroller Alan Hevesi began using them in 2005, said Robert Whalen, a spokesman for the current Comptroller Thomas DiNapoli. DiNapoli determined after a review that the strategy of investing in 184 funds through 7 fund of funds was "suboptimal" due to redundant investments, unwanted correlations between the funds' results and the stock market's performance, and costly fees, Whalen explained. Clipping some of these fund managers has a side benefit. Placement agents who have been hired by them and who have been swept up in the state attorney general's pension kickback probe can no longer collect ongoing fees. For example, former hedge fund manager Barrett Wissman, the first of two individuals to plead guilty in Democratic Attorney General Andrew Cuomo's kickback investigation, was formerly associated with Texas-based Hunt Financial Ventures. New York's pension fund invested a total of $100 million with Hunt Financial Ventures, which only produced a $7 million return from January 2005 to December 31, 2007, when the investment was ended, according to the comptroller's data. The fund of funds largely are being replaced by the comptroller's staff, though they will still use fund of funds on occasion, the spokesman said. The pension fund, which has declined about 25 percent since its official value was last pegged at $122 billion, now has about $3 billion of hedge fund investments. DiNapoli is still reviewing all transactions that took place under former state comptroller Alan Hevesi, a list that includes private equity funds. The spokesman said the review includes issues like conduct: "Are their hands clean, was there some measure of culpability?" Both New York state and New York City's pension funds voted to block new capital investments with private equity firm Quadrangle due to its ties to the pension probe, but were overruled by other investors. For more details, please see: . The pension has not yet decided if it will exit its Quadrangle investment, the state comptroller's spokesman said. Other hedge funds DiNapoli axed that also have links to Cuomo's probe include Memphis-based Consulting Services Group and Pequot Capital Management. The fund of funds the state pension fund still has the biggest stakes in are Ramius Advisors, LLC and Mezzacappa Management, LLC. "We're going down to zero," the spokesman said, noting it takes time to whittle down the existing stakes. (Reporting by Joan Gralla; Editing by Chizu Nomiyama) Keywords: NEWYORK HEDGEFUNDS/ (E-mail: joan.gralla@reuters.com; Tel: +1-646-223-6345; Reuters Messaging: joan.gralla.thomsonreuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.
By: AFX 26 May 2009 03:49 PM ET
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By Joan Gralla NEW YORK, May 26 (Reuters) - New York state's pension fund has cut its so-called fund of funds investments to about $500 million from $5 billion since January 2008, after deciding direct investments were preferable, a spokesman said Tuesday. Fund of funds invest money in hedge funds on behalf of their investors, and they helped the state gain access to "blue chip" funds when former Comptroller Alan Hevesi began using them in 2005, said Robert Whalen, a spokesman for the current Comptroller Thomas DiNapoli. DiNapoli determined after a review that the strategy of investing in 184 funds through 7 fund of funds was "suboptimal" due to redundant investments, unwanted correlations between the funds' results and the stock market's performance, and costly fees, Whalen explained. Clipping some of these fund managers has a side benefit. Placement agents who have been hired by them and who have been swept up in the state attorney general's pension kickback probe can no longer collect ongoing fees. For example, former hedge fund manager Barrett Wissman, the first of two individuals to plead guilty in Democratic Attorney General Andrew Cuomo's kickback investigation, was formerly associated with Texas-based Hunt Financial Ventures. New York's pension fund invested a total of $100 million with Hunt Financial Ventures, which only produced a $7 million return from January 2005 to December 31, 2007, when the investment was ended, according to the comptroller's data. The fund of funds largely are being replaced by the comptroller's staff, though they will still use fund of funds on occasion, the spokesman said. The pension fund, which has declined about 25 percent since its official value was last pegged at $122 billion, now has about $3 billion of hedge fund investments. DiNapoli is still reviewing all transactions that took place under former state comptroller Alan Hevesi, a list that includes private equity funds. The spokesman said the review includes issues like conduct: "Are their hands clean, was there some measure of culpability?" Both New York state and New York City's pension funds voted to block new capital investments with private equity firm Quadrangle due to its ties to the pension probe, but were overruled by other investors. For more details, please see: . The pension has not yet decided if it will exit its Quadrangle investment, the state comptroller's spokesman said. Other hedge funds DiNapoli axed that also have links to Cuomo's probe include Memphis-based Consulting Services Group and Pequot Capital Management. The fund of funds the state pension fund still has the biggest stakes in are Ramius Advisors, LLC and Mezzacappa Management, LLC. "We're going down to zero," the spokesman said, noting it takes time to whittle down the existing stakes. (Reporting by Joan Gralla; Editing by Chizu Nomiyama) Keywords: NEWYORK HEDGEFUNDS/ (E-mail: joan.gralla@reuters.com; Tel: +1-646-223-6345; Reuters Messaging: joan.gralla.thomsonreuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.
Progressive - Frontier Markets FOFs
Long term opportunities from Frontier Markets (from CityWire.com)
00:01:00 27 May 2009
At a time when the focus is on short-term news and what it means for economic prospects, it is worthwhile stepping back to look at depressed assets where the investment case is unashamedly built on a long-term story.
While emerging markets have recovered in recent weeks, the performance of frontier markets has been more mixed. One of the best ways of getting exposure is through the Advance Frontier Markets fund (AFMF), which holds an actively managed portfolio of funds invested in the world’s least developed economies.
In some ways investing in Advance Frontier Markets Fund is analogous to investing in Templeton Emerging Markets Inv (TEM) (Temit) in its early days. June 2009 is the 20th anniversary of Temit’s launch, and over that time emerging markets have moved a long way from the esoteric end of the investment spectrum.
Despite big setbacks such as the Russian debt crisis and the Asian currency crisis, those investors who backed Temit at launch have seen a 10-fold increase in the value of their investment.
The legacy of the current crisis in the world economy is likely to be a prolonged period of subdued growth, an environment in which few funds are likely to replicate Temit’s success. However, the growth potential of the world’s least developed economies affords AFMF a much better chance of emulating Temit over the next two decades.
AFMF is managed by Progressive, a fund of funds specialist with a particular expertise in emerging markets. Progressive launched AFMF to provide exposure to the world’s least developed economies, such as those in Africa, the smaller Asian nations and countries in the Middle East.
Launched in 2007, AFMF initially withstood the onset of the credit crunch. However, the intensification of the crisis last summer led to a sudden withdrawal of liquidity from frontier markets, and AFMF’s net asset value dropped sharply. The share price decline was aggravated by the loss of its premium rating and move to a large discount.
AFMF’s portfolio is comprised of investments in over 20 funds. While a few may be familiar to investors, such as the Investec Africa fund, most reflect the diligent work of the Progressive team in finding specialist managers working in the countries in which they are invested. For example, none but the most determined investor is likely to have discovered the Avaron Balkan fund or the IMARA Zimbabwe fund.
Therefore AFMF represents an excellent way of having a diversified play on less developed countries with strong potential.
00:01:00 27 May 2009
At a time when the focus is on short-term news and what it means for economic prospects, it is worthwhile stepping back to look at depressed assets where the investment case is unashamedly built on a long-term story.
While emerging markets have recovered in recent weeks, the performance of frontier markets has been more mixed. One of the best ways of getting exposure is through the Advance Frontier Markets fund (AFMF), which holds an actively managed portfolio of funds invested in the world’s least developed economies.
In some ways investing in Advance Frontier Markets Fund is analogous to investing in Templeton Emerging Markets Inv (TEM) (Temit) in its early days. June 2009 is the 20th anniversary of Temit’s launch, and over that time emerging markets have moved a long way from the esoteric end of the investment spectrum.
Despite big setbacks such as the Russian debt crisis and the Asian currency crisis, those investors who backed Temit at launch have seen a 10-fold increase in the value of their investment.
The legacy of the current crisis in the world economy is likely to be a prolonged period of subdued growth, an environment in which few funds are likely to replicate Temit’s success. However, the growth potential of the world’s least developed economies affords AFMF a much better chance of emulating Temit over the next two decades.
AFMF is managed by Progressive, a fund of funds specialist with a particular expertise in emerging markets. Progressive launched AFMF to provide exposure to the world’s least developed economies, such as those in Africa, the smaller Asian nations and countries in the Middle East.
Launched in 2007, AFMF initially withstood the onset of the credit crunch. However, the intensification of the crisis last summer led to a sudden withdrawal of liquidity from frontier markets, and AFMF’s net asset value dropped sharply. The share price decline was aggravated by the loss of its premium rating and move to a large discount.
AFMF’s portfolio is comprised of investments in over 20 funds. While a few may be familiar to investors, such as the Investec Africa fund, most reflect the diligent work of the Progressive team in finding specialist managers working in the countries in which they are invested. For example, none but the most determined investor is likely to have discovered the Avaron Balkan fund or the IMARA Zimbabwe fund.
Therefore AFMF represents an excellent way of having a diversified play on less developed countries with strong potential.
Thursday, May 21, 2009
Numbers on size of Alternative Asset community -
Brighton House Associates and the Alternative Arena
By Dennis Ford
BHA has analyzed the global alternative investment industry and we estimate that there are 20,000 fund managers:
10,000 Hedge Funds and Funds of Funds
5,000 Private Equity Funds
3,000 Venture Capital Funds
2,000 Real Estate Funds
Every one of these fund managers could benefit from BHA’s services.
On the other side of the industry divide, we estimate that there are approximately 50,000 alternative investor firms. We have broken this universe into 14 categories:
Banks
Consultants
Corporate Pensions
Endowments
Family Offices
Foundations
Fund of Funds
Government Pensions
Healthcare Plans
Insurance Companies
Private Banks
Sovereign Wealth Funds
Tax Exempt Organizations
Union Pension Plans
There are probably only a quarter of a million people participating in the entire alternative investment arena. One common observation is that there is an amazing amount of assets flowing in and out of this relatively small arena. Another frequent observation is that given the industry’s small size, the old adage “everybody knows everybody” most certainly applies. The issue today, for almost all of the parties concerned, is that market churn has made it hard to keep up with who’s who and who’s where!
If you are a reader of the BHA Investor Monitor, I am sure you have heard me proclaim, “Data comes in two forms: out of date and really out of date.” If you have a small investor relations team trying to keep up with 1,000 or more firms, there is a good chance that your information on these firms and their current interests is stale. (How could it not be?)
This is where the BHA research service comes into play. BHA has a team of 20 analysts updating our investor profiles every 90 days while adding 120 new ones each week. It takes a dedicated effort to supply fresh, accurate information about the alternative institutional investor community. Share your short list and call list with your dedicated BHA research analyst, and he or she will focus on finding new leads from investors you haven’t spoken with recently or have never met. The global breakdown of the BHA investor mandate database is 40% U.S., 40% Europe, and 20% the rest of the world. The net-net is: we can provide the BHA value anywhere.
By Dennis Ford
BHA has analyzed the global alternative investment industry and we estimate that there are 20,000 fund managers:
10,000 Hedge Funds and Funds of Funds
5,000 Private Equity Funds
3,000 Venture Capital Funds
2,000 Real Estate Funds
Every one of these fund managers could benefit from BHA’s services.
On the other side of the industry divide, we estimate that there are approximately 50,000 alternative investor firms. We have broken this universe into 14 categories:
Banks
Consultants
Corporate Pensions
Endowments
Family Offices
Foundations
Fund of Funds
Government Pensions
Healthcare Plans
Insurance Companies
Private Banks
Sovereign Wealth Funds
Tax Exempt Organizations
Union Pension Plans
There are probably only a quarter of a million people participating in the entire alternative investment arena. One common observation is that there is an amazing amount of assets flowing in and out of this relatively small arena. Another frequent observation is that given the industry’s small size, the old adage “everybody knows everybody” most certainly applies. The issue today, for almost all of the parties concerned, is that market churn has made it hard to keep up with who’s who and who’s where!
If you are a reader of the BHA Investor Monitor, I am sure you have heard me proclaim, “Data comes in two forms: out of date and really out of date.” If you have a small investor relations team trying to keep up with 1,000 or more firms, there is a good chance that your information on these firms and their current interests is stale. (How could it not be?)
This is where the BHA research service comes into play. BHA has a team of 20 analysts updating our investor profiles every 90 days while adding 120 new ones each week. It takes a dedicated effort to supply fresh, accurate information about the alternative institutional investor community. Share your short list and call list with your dedicated BHA research analyst, and he or she will focus on finding new leads from investors you haven’t spoken with recently or have never met. The global breakdown of the BHA investor mandate database is 40% U.S., 40% Europe, and 20% the rest of the world. The net-net is: we can provide the BHA value anywhere.
S. Korea's National Pension Fund to Resume Invsesting Abroad
S Korean fund to resume investing abroad
By Song Jung-a in Seoul (FT)
Published: May 21 2009 18:40 Last updated: May 21 2009 18:40
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South Korea’s state-run National Pension Service plans to resume overseas investments next month, encouraged by the won’s sharp appreciation against the dollar.
The world’s fifth-largest pension fund, with about $189bn in assets under management, abruptly reversed course on plans to increase its overseas and equities exposure last year due to uncertainties arising from the global financial crisis.
EDITOR’S CHOICE
Suitability of target-date funds in doubt - May-03
Pensions sector bucks the trend - May-03
PPM gives go-ahead to hedge vehicles - Apr-05
Conservatism pays off for South Korea - Mar-08
Talking head: Trustees must realise a sense of urgency - Mar-08
Pension funds’ long term view demands active role - Mar-01
“Last year, we suspended overseas investments due to the volatility of the Korean won against the dollar,” said Park Hae-choon, chief executive of the pension fund, at a conference in Hong Kong. “Since the won and the dollar have stabilised, those pending investments will be resumed as of June this year.”
The NPS plans to cut bond holdings, overwhelmingly domestic, from more than 80 per cent to 50 per cent of total assets by the end of 2012, more than double equity exposure to 40 per cent and quadruple alternative investments to 10 per cent.
The fund now plans to resume its investment in riskier assets.
The NPS aims to increase its exposure to domestic equities to 17 per cent by the end of this year from 13 per cent.
“The domestic market is not big enough for the pension fund to invest and that’s why we plan to increase overseas investments,” Mr Park said, adding that an investment committee will meet next week to decide where and how much to invest.
The pension fund owns stakes of more than 5 per cent in 107 Korean companies, including Samsung Electronics and Posco.
The Korean stock market has gained 26 per cent this year after dropping more than 40 per cent last year.
Under a joint venture with Oaktree Capital Management, the US private equity fund, NPS is to make matching investments in domestic sectors ranging from infrastructure to real estate.
Oaktree earmarked $3bn for Korean investment. NPS has a similar agreement with Blackstone Group, which has set aside $2bn for South Korea.
The country’s state-run companies and financial groups held back from making big investments abroad in an effort to curb the won’s slide against the dollar last year.
The Korean won dropped about 26 per cent last year against the dollar to become the worst performer among leading Asian currencies.
It has gained about 28 per cent against the dollar since it touched an 11-year low in early March.
Until mid-2008, the NPS was moving toward more aggressive investment in riskier assets to boost returns. But high volatility amid the global crisis forced it back to safer assets.
The fund made a small profit on its assets last year as its focus on bonds protected it from volatile international markets.
Copyright The Financial Times Limited 2009
By Song Jung-a in Seoul (FT)
Published: May 21 2009 18:40 Last updated: May 21 2009 18:40
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South Korea’s state-run National Pension Service plans to resume overseas investments next month, encouraged by the won’s sharp appreciation against the dollar.
The world’s fifth-largest pension fund, with about $189bn in assets under management, abruptly reversed course on plans to increase its overseas and equities exposure last year due to uncertainties arising from the global financial crisis.
EDITOR’S CHOICE
Suitability of target-date funds in doubt - May-03
Pensions sector bucks the trend - May-03
PPM gives go-ahead to hedge vehicles - Apr-05
Conservatism pays off for South Korea - Mar-08
Talking head: Trustees must realise a sense of urgency - Mar-08
Pension funds’ long term view demands active role - Mar-01
“Last year, we suspended overseas investments due to the volatility of the Korean won against the dollar,” said Park Hae-choon, chief executive of the pension fund, at a conference in Hong Kong. “Since the won and the dollar have stabilised, those pending investments will be resumed as of June this year.”
The NPS plans to cut bond holdings, overwhelmingly domestic, from more than 80 per cent to 50 per cent of total assets by the end of 2012, more than double equity exposure to 40 per cent and quadruple alternative investments to 10 per cent.
The fund now plans to resume its investment in riskier assets.
The NPS aims to increase its exposure to domestic equities to 17 per cent by the end of this year from 13 per cent.
“The domestic market is not big enough for the pension fund to invest and that’s why we plan to increase overseas investments,” Mr Park said, adding that an investment committee will meet next week to decide where and how much to invest.
The pension fund owns stakes of more than 5 per cent in 107 Korean companies, including Samsung Electronics and Posco.
The Korean stock market has gained 26 per cent this year after dropping more than 40 per cent last year.
Under a joint venture with Oaktree Capital Management, the US private equity fund, NPS is to make matching investments in domestic sectors ranging from infrastructure to real estate.
Oaktree earmarked $3bn for Korean investment. NPS has a similar agreement with Blackstone Group, which has set aside $2bn for South Korea.
The country’s state-run companies and financial groups held back from making big investments abroad in an effort to curb the won’s slide against the dollar last year.
The Korean won dropped about 26 per cent last year against the dollar to become the worst performer among leading Asian currencies.
It has gained about 28 per cent against the dollar since it touched an 11-year low in early March.
Until mid-2008, the NPS was moving toward more aggressive investment in riskier assets to boost returns. But high volatility amid the global crisis forced it back to safer assets.
The fund made a small profit on its assets last year as its focus on bonds protected it from volatile international markets.
Copyright The Financial Times Limited 2009
Wednesday, May 20, 2009
Interesting Update on Japanese Hedge Funds
Samena Capital Starts Japan-Focused Stock Hedge Fund (Update2)
Share Email Print A A A
By Tomoko Yamazaki
May 12 (Bloomberg) -- Samena Capital, a London-based investment firm with more than $200 million, will start a Japan- focused hedge fund, betting the nation’s stock prices will continue to rebound in the wake of the global credit crisis.
Samena Japan Absolute Return Fund will be managed by Ramiz Hasan and Celia Farnon and will start with capital of $25 million, the company said in an e-mailed statement. It will employ a so-called long-short strategy and be marketed primarily to institutional and high-net-worth investors in Asia, the Middle East, North Africa, the U.S. and Europe.
The firm’s entry to the Japanese market comes after an exodus of funds targeting the nation’s shares last year. It’s betting the Nikkei 225 Stock Average’s 32 percent rebound since a 27-year-low in March has further to go.
“Is there value still left in Japan? Yes,” Hasan, who ran a Japan-focused hedge fund at his own firm Invicta Investment Management until 2007, said in Hong Kong.
The new fund is the second after Samena Capital, established in February 2008, raised about $200 million for the Samena Special Situations Fund, which invests in companies going through transformations such as mergers, acquisitions and management changes. The fund has returned 22 percent from Aug. 15 through yesterday after keeping its investments in cash until the middle of March, according to Hasan.
Investor Appetite
The firm also plans to open a new investment advisory office in Tokyo in the next two months, Hasan said in a telephone interview.
The global hedge-fund industry decreased by $136 billion in the first three months of this year to $1.34 trillion, following record losses last year, according to Singapore-based Eurekahedge Pte. The industry has shrunk 32 percent from a peak of $1.95 trillion at the end of June 2008.
Thirty-two Japan-focused, long-short equity funds that bet on the rise and fall of the country’s stocks shut down last year. Hedge funds focused primarily on Japan saw the greatest number of closures in the Asia-Pacific region last year, according to London-based AsiaHedge magazine. Another five such funds closed in the first quarter.
In addition, 12 Japan market-neutral funds went under in 2008. Market-neutral funds seek to profit without taking a bet on the direction of the market.
“This is the best time to be investing in,” Hasan said. “If you look at the fund structure, you can hedge and you can short. We will be careful in terms of initial entry point.”
More Funds
The firm aims to capitalize on pension and health-care reforms that may follow the nation’s forthcoming election, as well as greater government appetite for engagement with countries in the Asian subcontinent, the Middle East and North Africa, it said.
Spencer Privett, joint managing partner at Maples and Calder in Hong Kong, said the law firm has worked in the last six months on at least a dozen new Cayman Island-based funds that focus on Japan.
“After a relatively quiet period we are now starting to see movement amongst international and domestic fund managers setting up new Cayman funds investing, or for sale to investors, in Japan,” he said.
Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices, and participate substantially in profits from money invested.
To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net Last Updated: May 12, 2009 04:12 EDT
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By Tomoko Yamazaki
May 12 (Bloomberg) -- Samena Capital, a London-based investment firm with more than $200 million, will start a Japan- focused hedge fund, betting the nation’s stock prices will continue to rebound in the wake of the global credit crisis.
Samena Japan Absolute Return Fund will be managed by Ramiz Hasan and Celia Farnon and will start with capital of $25 million, the company said in an e-mailed statement. It will employ a so-called long-short strategy and be marketed primarily to institutional and high-net-worth investors in Asia, the Middle East, North Africa, the U.S. and Europe.
The firm’s entry to the Japanese market comes after an exodus of funds targeting the nation’s shares last year. It’s betting the Nikkei 225 Stock Average’s 32 percent rebound since a 27-year-low in March has further to go.
“Is there value still left in Japan? Yes,” Hasan, who ran a Japan-focused hedge fund at his own firm Invicta Investment Management until 2007, said in Hong Kong.
The new fund is the second after Samena Capital, established in February 2008, raised about $200 million for the Samena Special Situations Fund, which invests in companies going through transformations such as mergers, acquisitions and management changes. The fund has returned 22 percent from Aug. 15 through yesterday after keeping its investments in cash until the middle of March, according to Hasan.
Investor Appetite
The firm also plans to open a new investment advisory office in Tokyo in the next two months, Hasan said in a telephone interview.
The global hedge-fund industry decreased by $136 billion in the first three months of this year to $1.34 trillion, following record losses last year, according to Singapore-based Eurekahedge Pte. The industry has shrunk 32 percent from a peak of $1.95 trillion at the end of June 2008.
Thirty-two Japan-focused, long-short equity funds that bet on the rise and fall of the country’s stocks shut down last year. Hedge funds focused primarily on Japan saw the greatest number of closures in the Asia-Pacific region last year, according to London-based AsiaHedge magazine. Another five such funds closed in the first quarter.
In addition, 12 Japan market-neutral funds went under in 2008. Market-neutral funds seek to profit without taking a bet on the direction of the market.
“This is the best time to be investing in,” Hasan said. “If you look at the fund structure, you can hedge and you can short. We will be careful in terms of initial entry point.”
More Funds
The firm aims to capitalize on pension and health-care reforms that may follow the nation’s forthcoming election, as well as greater government appetite for engagement with countries in the Asian subcontinent, the Middle East and North Africa, it said.
Spencer Privett, joint managing partner at Maples and Calder in Hong Kong, said the law firm has worked in the last six months on at least a dozen new Cayman Island-based funds that focus on Japan.
“After a relatively quiet period we are now starting to see movement amongst international and domestic fund managers setting up new Cayman funds investing, or for sale to investors, in Japan,” he said.
Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices, and participate substantially in profits from money invested.
To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net Last Updated: May 12, 2009 04:12 EDT
Monday, May 11, 2009
Korea - Fiscal Stimulous - Third after China and US
Korea fiscal stimulour is third largest as a percent of GDP after China and the US. China is massive at 15%.
Wednesday, May 6, 2009
iShares™ Launches Asia ETF Series in Hong Kong
iShares™ Launches Asia ETF Series in Hong Kong
Four New Funds Providing Efficient and Diversified Access to Markets in Asia
[Hong Kong, April 22, 2009] iShares, the world leader in Exchange Traded Funds (“ETFs”)1, is pleased to announce the launch of a new iShares Asia ETF Series that includes four new iShares ETFs in Hong Kong. The new iShares ETFs will provide investors with a better way to invest in Asia by offering efficient access to market segments across the region. They will begin trading on the Stock Exchange of Hong Kong (“SEHK”) on April 23, 2009. The four new iShares ETFs are:
iShares MSCI Asia APEX 50 Index ETF (Stock Code: 3010)
iShares MSCI Asia APEX Mid Cap Index ETF (Stock Code: 3032)
iShares MSCI Asia APEX Small Cap Index ETF (Stock Code: 3004)
iShares MSCI Emerging Asia Index ETF (Stock Code: 2802)
1 Source: In terms of assets under management as of 31/12/08. Barclays Global Investors, Bloomberg.
iShares Launches Asia ETF Series in Hong Kong
April 22, 2009/ P.2 of 4
The three new APEX ETFs aim to deliver instant, diversified exposure to markets across Asia by providing investors with opportunities to invest in baskets of large, mid and small cap Asian companies. The fourth ETF, the iShares MSCI Emerging Asia Index ETF, provides diversified exposure to large and mid cap companies in emerging Asian countries like South Korea, Taiwan, India, Malaysia, Indonesia, Thailand and Philippines. Commenting on the new products, Nick Good, CEO of iShares Asia Pacific said, “The launch of the iShares Asia ETF Series showcases our commitment to offering products and services relevant to the Asian market. Investors in Asia are seeking products with region-wide exposure while, at the same time, they want to know exactly what they have invested in and that their investments can be traded easily. These are the unique benefits shared by all iShares ETFs, including our four new products.” Jane Leung, Senior Director of Product for iShares Asia ex-Japan commented, “We pride ourselves on developing products that are versatile enough to meet varying investor needs – both short term and long term. Going forward, iShares will continue to provide tools for investors in Asia that help them achieve their investment objectives while managing risk in a cost-effective manner.” With the launch of these new ETFs , iShares is more than doubling its ETF offering in Hong Kong which currently includes:
iShares FTSE/Xinhua A50 China Tracker (Stock Code: 2823)
iShares MSCI China Tracker (Stock Code: 2801)
iShares BSE SENSEX India Tracker (Stock Code: 2836)
iShares is the world’s largest provider of ETFs with nearly US$325 billion2 in assets under management in ETFs. More than 360 iShares ETFs 3 are currently available in markets around the world covering a comprehensive range of asset classes, market sectors and segments. ENDS
2
Four New Funds Providing Efficient and Diversified Access to Markets in Asia
[Hong Kong, April 22, 2009] iShares, the world leader in Exchange Traded Funds (“ETFs”)1, is pleased to announce the launch of a new iShares Asia ETF Series that includes four new iShares ETFs in Hong Kong. The new iShares ETFs will provide investors with a better way to invest in Asia by offering efficient access to market segments across the region. They will begin trading on the Stock Exchange of Hong Kong (“SEHK”) on April 23, 2009. The four new iShares ETFs are:
iShares MSCI Asia APEX 50 Index ETF (Stock Code: 3010)
iShares MSCI Asia APEX Mid Cap Index ETF (Stock Code: 3032)
iShares MSCI Asia APEX Small Cap Index ETF (Stock Code: 3004)
iShares MSCI Emerging Asia Index ETF (Stock Code: 2802)
1 Source: In terms of assets under management as of 31/12/08. Barclays Global Investors, Bloomberg.
iShares Launches Asia ETF Series in Hong Kong
April 22, 2009/ P.2 of 4
The three new APEX ETFs aim to deliver instant, diversified exposure to markets across Asia by providing investors with opportunities to invest in baskets of large, mid and small cap Asian companies. The fourth ETF, the iShares MSCI Emerging Asia Index ETF, provides diversified exposure to large and mid cap companies in emerging Asian countries like South Korea, Taiwan, India, Malaysia, Indonesia, Thailand and Philippines. Commenting on the new products, Nick Good, CEO of iShares Asia Pacific said, “The launch of the iShares Asia ETF Series showcases our commitment to offering products and services relevant to the Asian market. Investors in Asia are seeking products with region-wide exposure while, at the same time, they want to know exactly what they have invested in and that their investments can be traded easily. These are the unique benefits shared by all iShares ETFs, including our four new products.” Jane Leung, Senior Director of Product for iShares Asia ex-Japan commented, “We pride ourselves on developing products that are versatile enough to meet varying investor needs – both short term and long term. Going forward, iShares will continue to provide tools for investors in Asia that help them achieve their investment objectives while managing risk in a cost-effective manner.” With the launch of these new ETFs , iShares is more than doubling its ETF offering in Hong Kong which currently includes:
iShares FTSE/Xinhua A50 China Tracker (Stock Code: 2823)
iShares MSCI China Tracker (Stock Code: 2801)
iShares BSE SENSEX India Tracker (Stock Code: 2836)
iShares is the world’s largest provider of ETFs with nearly US$325 billion2 in assets under management in ETFs. More than 360 iShares ETFs 3 are currently available in markets around the world covering a comprehensive range of asset classes, market sectors and segments. ENDS
2
AIMA Unveils Fund Of Funds Best Practices Guide
AIMA Unveils Fund Of Funds Best Practices Guide
May 6, 2009
The international hedge fund industry group the Alternative Investment Management Association has published what it is calling the first-ever global best practice guide for fund of hedge funds managers.
The guide, which was developed by well-known funds of hedge funds practitioners, focuses on areas including risk management, due diligence, disclosure to investors, valuation, management of conflicts of interest and other operational issues.
According to AIMA, it will be a practical business tool for funds of hedge funds managers and will also seek to provide relevant and insightful information for investors, regulators and policy makers, and the hedge fund industry’s service providers.
The group involved in created the guide consisted of Unigestion, Financial Risk Management; Man Investments; Fauchier Partners; Pacific Alternative Asset Management; Ivy Asset Management; HDF Finance; Penjing Asset Management and Simmons & Simmons.
Andrew Baker, CEO of AIMA, and a member of the steering group, commented, “AIMA has produced a huge body of work on sound practices and this was the ‘missing book in the library’. It is particularly important given recent events that there should be dedicated guidelines for funds of hedge funds managers. Funds of funds are a critical sector in the industry, are of particular interest to institutional investors, and it is right that AIMA has taken the lead in documenting sound practices.”
The guide is currently only available to registered users of the firm’s Web site.
May 6, 2009
The international hedge fund industry group the Alternative Investment Management Association has published what it is calling the first-ever global best practice guide for fund of hedge funds managers.
The guide, which was developed by well-known funds of hedge funds practitioners, focuses on areas including risk management, due diligence, disclosure to investors, valuation, management of conflicts of interest and other operational issues.
According to AIMA, it will be a practical business tool for funds of hedge funds managers and will also seek to provide relevant and insightful information for investors, regulators and policy makers, and the hedge fund industry’s service providers.
The group involved in created the guide consisted of Unigestion, Financial Risk Management; Man Investments; Fauchier Partners; Pacific Alternative Asset Management; Ivy Asset Management; HDF Finance; Penjing Asset Management and Simmons & Simmons.
Andrew Baker, CEO of AIMA, and a member of the steering group, commented, “AIMA has produced a huge body of work on sound practices and this was the ‘missing book in the library’. It is particularly important given recent events that there should be dedicated guidelines for funds of hedge funds managers. Funds of funds are a critical sector in the industry, are of particular interest to institutional investors, and it is right that AIMA has taken the lead in documenting sound practices.”
The guide is currently only available to registered users of the firm’s Web site.
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