Category — hedge funds
So you want to setup a P/E shop?
Very interesting interview from Knowledge@Wharton:
The market events of August 2007 ended a robust 2003-2007 fundraising cycle. Currently, sentiment is one of caution. Thematically, investors are seeking counter-cyclical and risk-mediating investment strategies, such as distressed/turnaround and mezzanine. At the same time, investors recognize that their 2001-2003 fund investments outperformed due to the market conditions. Now may be a time to replicate those strong vintages, particularly by backing managers that have a history of investing successfully through the cycle. On balance, first-time fundraising difficulty does increase, but is by no means impossible. Expectations should be to achieve a reasonable fund size adequate to execute the stated strategy. The emphasis on having a strong institutional investor base increases because these are the partners you can rely on to remain supportive if you exhaust available capital in a short time period.
May 15, 2008 No Comments
SAT’s and Hedge Fund Return
The new standard of diligence for hedge funds: any recent family member deaths and what was their SAT score? Higher SAT scores translate into higher returns:
The researchers found a “strong positive relation” between a hedge fund’s performance and the average SAT score at its manager’s school. To put the relationship into context, the researchers offer this illustration: “Everything else being the same, a manager from an undergraduate institution with a 200-point higher SAT — for instance, from Yale University, with an SAT of 1480 at the end of our study period, instead of from George Washington University, with an SAT of 1280 — can expect to earn 0.73 percent more per year.”
September 11, 2007 No Comments
“Rats Flee Sinking Ships” – Hedge Fund Withdrawals Reach 7-Year High
Dealbreaker for headline and link:
Hedge funds, which have an estimated $1.9 trillion in assets combined, saw investors sell off an estimated $32 billion worth in July, said a report Tuesday.
The outflow was the largest since 2000, according to a monthly report by TrimTabs, an investment research firm. The August outflow could be even greater, the firm said, although complete data is not yet available.
Funds of hedge funds posted some of the biggest outflows, with investors selling $55 billion in assets in July. Through the end of June, funds of hedge funds had posted 2007 net inflows of $162 billion.
September 4, 2007 No Comments
Iraq’s First Hedge Fund
$100 million! From the WSJ:
Iraq Fund LLC, Iraq’s first hedge fund, aims to raise as much as $100 million within 18 months for investment in companies listed on the local bourse and in state enterprises, a company official said.
The fund, launched despite the ongoing violent conflict in the country, primarily targets undervalued, Iraq Stock Exchange-listed firms and state-owned companies in manufacturing, construction, cement and pharmaceuticals, Iraq Fund operational director Rand Hultz told Dow Jones Newswires at a Dubai conference.
“We target $100 million. There have been delays, but we’d like to do it within the next 12 to 18 months, Hultz said.
August 29, 2007 6 Comments
Hedge Fund Strategy of the Month – Fixed Income Arbitrage
From the Financial News linked in FierceFinance:
The fixed income arbitrage index was up 0.31%. Each of the other nine strategies covered by Credit Suisse/Tremont lost money over the same period.The overall investable hedge fund index published by Credit Suisse/Tremont was down 1.54% for the first two weeks of August.
However, many individual hedge funds following the fixed income arbitrage strategy lost money, including seven of the 10 that reported their results for the first 10 days of August.
August 28, 2007 1 Comment
Buying at the Peak
Hedge fund assests increased to record levels last quarter just in time to catch the coming decline:
Total hedge fund asset levels increased by 8% in the second quarter of 2007, to $2.593 trillion from $2.401 trillion in the first quarter of 2007, according to a report by HFN (HedgeFund.net).
The Q2 2007 HFN Hedge Fund Industry Asset Flow Report, which details total assets and asset flows across strategies, sectors, regions and asset classes in which hedge funds operate, revealed that new assets allocated to the industry were estimated at $107.3 billion in Q2, while performance gains accounted for an additional $89.6 billion, the second largest gains on record.
August 17, 2007 No Comments
They’re All Connected – US Credit Woes Hit Asian Shares
Worries about US credit-market losses spreading to the Asia Pacific region flavoured trading Tuesday. Shares generally fell or rose only weakly, with Bangkok, Jakarta, Sydney and Seoul leading the drop.
…
On currency markets, the US dollar hit a two-month high against the South Korean won as investors worried about credit and foreigners continued to sell shares. The Kospi ended the day down 1.7 per cent at 1,817.89. Some investors sold shares to avoid exposure to volatility elsewhere as Seoul will be closed Thursday for a national holiday. The dollar rose to 932.10 won.
This short term dollar rise isn’t surprising. The market’s knee-jerk reaction during periods of uncertainty is a flight to safety and for a very long time safety has been the US. But how can the US simultaneously be the cause and the solution to market uncertainty? In the long term it can’t be. Expect the 2nd wave of retreats safety to the Euro or gold.
We’ll soon see one of the most overlooked consequences of globalization – the dearth of diversity. When everything, stocks, bonds, commodities, etc. moves in the same direction, the models can’t tell you the best way to manage risk. There isn’t any historical data that covers this situation. What the models will tell you is that the more you lose, the more “mis-priced” the market is and to double down. Imagine thousands of hedge funds with the same basic ideas, running substantially the same models and not realizing that the fundamental situation has now changed.
The music has stopped, the flood of credit has been cut off and not everyone has a chair. Expect to hear the Mises term, “crack-up boom” a lot more in the next year.
August 14, 2007 No Comments
MF Financial IPO debuts far below expectations
The broking unit of Man Financial Group plc floated its IPO yesterday. It didn’t go over so well, apparently.
MF Global came to the market at $30 per share, raising $2.9 billion for the 80% stake sold. That fell appreciably below the bottom end of the $34-$37-per-share range announced earlier. Worse, the stock stumbled on its New York Stock Exchange debut, falling nearly 9% late in first-day dealing on Thursday [July 19] to $27.33.
Blackstone’s shares remained above its IPO offering price ($31) for approximately one and a half trading days, if memory serves. This one didn’t even last through its first trading day before tanking.
July 20, 2007 No Comments
WSJ: Bloodbath in ABX
From the MarketBeat Blog:
Worries about subprime lending drove the riskiest tranche of the closely-watched subprime ABX derivative index to a record low of 44 cents on the dollar today — understandable, given everything that’s gone on in the subprime sector.
But higher-quality tranches of the ABX also took an ugly haircut today — the AAA-rated section of the index fell to 95 from about 100, while the AA-rated tranche fell to 88 from 100, according to Markit. The A-rated tranche is down to 70 from 90 a month ago, Andrew Lahde, managing partner of Lahde Capital Management, a hedge fund in Santa Monica, Calif., told Dow Jones Newswires.
And all of this happened without any news to drive the market.
The post also linked to some scary charts from Barry Ritholtz one which we’ve posted below. If I was playing Line Rider I would be intimidated, if I was long I would start putting my resume together. See the rest of the charts he posted and comments here.
July 17, 2007 1 Comment
Wall St On Edge and Scrambling To Avoid Sub-Prime Domino Effect
From BusinessWeek:
It’s white-knuckle time on Wall Street as firms try to prevent the subprime mess from spreading. The hedge fund blowup has suddenly thrown the world’s biggest financial institutions into a game of brinkmanship that will end in one of three ways: a quick, brutal crash of the subprime mortgage market and possibly the broader corporate bond market; a slow, painful meltdown of one or both lasting many months; or a short-term blip that, over time, will be forgotten as conditions return to normal.
Disaster has been averted so far. But pressure continues to come from all sides. The decisions made by Wall Street’s bankers, hedge fund managers, and bond raters over the next several weeks will determine which way the game plays out. One twitchy move by any of them could lead to mutually assured destruction.
July 6, 2007 No Comments
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