HFR PRESS RELEASE EVENT. JUNE 8, 2010 LONDON, UK. May 2010 Hedge Fund Performance Worst Since November 2008 Losses Drop YTD 2010 Returns to +1.32%. Hedge Fund Research, Inc.
JUNE 8, 2010
Losses Drop YTD 2010 Returns to +1.32%
Hedge Fund Research, Inc.
CHICAGO, (June 7, 2010) – Hedge Fund performance was adversely impacted by the escalation of the Euro-centric sovereign bond crisis in May, with the HFRI Fund Weighted Composite Index declining by -2.26% for the month. May was the worst performance month since Nov 2008 and inclusive of the recent loss hedge funds have surrendered a large portion of early year gains, ending the first five months of 2010 with a gain of +1.32%. Hedge funds were broadly impacted by the sharp increase in risk aversion associated directly with the sovereign bond crisis escalation, as well as the effects this situation has had on global equity markets, corporate fixed income and currency markets.
Equity Hedge was the worst area of strategy performance, declining -3.7% in May, the worst month since Nov 2008. Global equity markets were broadly impacted by the increase in risk aversion, with weakest areas of performance in Fundamental Growth only partially offset by gains in Short Biased and Equity Market Neutral strategies.
Event Driven also posted sharp loss of -2.2% on increasing risk premiums in announced transactions and weakness in the corporate credit markets, with weakest areas of performance in Distressed and Shareholder Activist strategies.
Relative Value Arbitrage posted a loss of -0.98%, as losses in Convertible Arbitrage and Corporate credit strategies were only partially offset by gains in Volatility and Asset Backed strategies. May losses have pared 2010 gains for RVA, bringing YTD performance to +4%, but May also snaps a streak of 16 consecutive months of gains for Relative Value, the last monthly decline was December 2008.
Macro posted a loss of -0.94% as gains in currency focused funds were offset by losses in other Discretionary Macro strategies; Systematic Diversified Macro experienced a wide dispersion across constituents, with an average decline of 1% in May.
IN INDUSTRY RECOVERY
Capital inflows concentrated in industry’s largest firms;
Investors continue to focus on structure, UCITS
Hedge Fund Research, Inc.
CHICAGO, (April 20, 2010) – The hedge fund industry continued the recovery that began in 2009, with the HFRI Fund Weighted Composite Index gaining +2.56 percent for 1Q 2010, bringing the industry within two percent of its previous high watermark reached in October 2007, according to data released today by Hedge Fund Research (HFR), the leading provider of hedge fund industry data.
During the quarter, investors allocated $13.7 billion of new capital to the global hedge fund industry; this combined with a performance-based asset increase of $54 billion bringing total industry capital to $1.67 trillion.
All four main strategy areas experienced asset growth in the period, led by Event Driven strategies into which investors allocated $5.6 billion of new capital. Performance for the strategy was strong as well, with the HFRI Event Driven Index up +4.7 percent for the quarter, driven by significant contributions from Activist and Distressed sub-strategies. The smallest net inflow occurred in Macro strategies, with these receiving less than $1 billion of new capital. Macro funds posted only a modest gain of +0.2 percent for the quarter, with performance undermined by commodity weakness, falling volatility and a lack of persistent trends across asset classes. Equity Hedge and Relative Value strategies also posted both asset and performance gains for the quarter, with Relative Value completing 1Q10 with 15 consecutive months of performance gains.
Inflows concentrated in largest firms
While sixty percent of all funds experienced net inflows for the quarter, inflows were concentrated in the industry’s largest firms. Investors allocated $14.9 billion to firms with greater than $5 billion in assets under management (AUM), while firms managing between $500 million and $5 billion experienced net outflows of $3.7 billion combined. The overall concentration of industry assets increased, with firms greater than $5 billion (5.1 percent of all funds) now managing over 62 percent of industry capital. Larger funds narrowly outperformed smaller funds during both 1Q10 and 2009, with the asset-weighted version of the HFRI Fund Weighted Composite Index gaining +2.8 percent and +20.3 in those periods, respectively.
The percent of funds which reached their respective high watermark in the trailing twelve months rose to 52.2 percent. In addition to an increased interest in allocating via separately managed accounts, investors continue to demonstrate interest in UCITS III complaint vehicles; HFR now tracks nearly 400 UCITS III fund products.
“In contrast to the environment of the last two years, the drivers of hedge fund performance have recently shifted to tightening corporate credit, declining equity market volatility, currency adjustments and rising sovereign credit risk,” said Ken Heinz, President of HFR. “While allocations reflect continuing trends in Event Driven & Arbitrage strategies, investors are also focusing on fund structure and transparency, as well as new opportunities presented in currency, commodity and fixed income markets.”
FUND OF FUNDS CONSOLIDATION ACCELERATES
Industry leverage moderates from pre-crisis levels;
Incentive fees continue to decline
Hedge Fund Research, Inc.
CHICAGO, (June 8, 2010) – After falling steadily for four quarters, hedge fund liquidations rose again in the first quarter of 2010 with 240 funds closing during the period, according to the HFR Market Microstructure Industry Report released today by Hedge Fund Research (HFR), the leading provider of hedge fund industry data and analysis. Liquidations were disproportionately skewed towards Fund of Funds (FOF), with 102 FOF closing in the quarter, this marks the seventh consecutive quarter in which FOF liquidations have exceeded new launches.
Aggregated industry leverage employed by hedge funds has continued to moderate relative to five years ago, with seventy percent of all funds, which manage eighty-three percent of industry capital, utilizing some form of leverage. In the HFR Special Report: Hedge Fund Leverage, Relative Value Arbitrage and Macro strategies commonly employ higher levels of leverage than Event Driven and Equity Hedge strategies. Standard leverage metrics vary broadly across the hedge fund industry, with over half of all funds typically employing between 1 and 2 times investment capital. Larger funds typically exhibit a greater usage of leverage, with nearly 30 percent of all funds greater than $1 billion employing leverage in excess of two times their investment capital.
Incentive Fees continue to fall as fund performance dispersion declines
Indicative of continued pressure from investors for more attractive investment terms, average incentive fees declined by 8 basis points to 19.12 percent in 1Q 2010, the steepest drop since 2Q 2008, although average management fees were unchanged for the quarter at 1.58 percent. Performance dispersion between the best and worst deciles of performance narrowed in the less volatile period, with the top decile of all hedge funds returning an average of +15.2 percent, while the bottom decile lost an average of -8.6 percent.
“Both investors and fund managers are continuing to exhibit a heightened sensitivity to leverage and risk, even with the benefit of the performance recovery from 2009,” said Ken Heinz, President of HFR. “Managers are employing lower levels of leverage in response to higher realized asset volatility and higher costs of obtaining leverage, as well as investor preference for a less volatile return profile.”
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