Several hedge fund industry service providers are predicting 2014 to be the year of the emerging manager launch according to an article in Pensions & Investments. These include consultants, fund of fund managers, law offices and capital introductions departments. Experienced managers are launching new firms because their former firms are closed to new investors. Not only are managers starting new firms, they are also hiring their investment teams at their former firms. Banks continue to divest from proprietary trading desks and hedge funds. Investors are seeking emerging managers to meet their asset allocation target or replace their current funds according to Stephen Nesbitt, CEO of Cliffwater LLC, an alternative management consultant. As most investment is based on relationships, they are more willing to invest with managers with a shorter history according to Dean Backer, managing director of Goldman Sachs.
Asset raising will be easier for these intact teams according to Robert Kaplan, co-CIO of the Permal Group. The largest ones are Three Bays Capital ($500 million in assets under management) which is run by Matthew Sidman, an alumnus of Highfields Capital Management and Junto Capital Management ($317 million in AUM) which is run by James Parsons, an alumnus of Viking Global Investors. On the horizon are Aravt Global with Wui Yen Liow, formerly of Ziff Brothers Investments, and Anand Desai, formerly of Eton Park Capital Management. It is anticipated that they will launch with $500 million to $1 billion in AUM. Everyone else will need to provide incentives for their seed money such as reducing their management and performance fees and offering investors equity in their business according to Tracy McHale Stuart, partner and CEO of Corbin Capital Partners, a hedge fund of funds manager.
Monday, February 10, 2014
Sunday, February 9, 2014
A Sampling of Hedge Fund Views on 2014
Hedge fund managers are predicting financial markets to be more volatile and, thus, afford them more opportunities for improved investment returns in 2014 according to articles in Pension & Investments 2014 Outlook report.
Central bank intervention from the Federal Reserve, European Central Bank and Bank of Japan has kept interest rates low and caused equity prices to rebound impressively in 2013. Their policies, along with the US budget accord and a recovered housing market, will continue to help the world economy to strengthen. This will give investors confidence to pursue more risky assets such as emerging markets and small cap stocks.
According to Lee Ainslie of Maverick Capital, equity long/short will have better performance as the correlations between securities' returns will be lower. Managers relying on fundamental analysis of corporates will have their positions less influenced by macro economic factors. Other hedge funds are looking at complex strategies for returns. Farallon Capital is investing in distressed European debt, event driven equity in merger arbitrage and US commercial real estate. They are buying foreclosed properties and flipping them to other investors after rehabilitating and finding renters for them. DW Investment Management will continue to hold positions in single corporate credit securities, structured corporate credit, residential and commercial mortgage backed securities and student loan backed instruments. Magnetar Capital will invest in the US energy build out caused by the explosion of hydraulic fracturing.
Central bank intervention from the Federal Reserve, European Central Bank and Bank of Japan has kept interest rates low and caused equity prices to rebound impressively in 2013. Their policies, along with the US budget accord and a recovered housing market, will continue to help the world economy to strengthen. This will give investors confidence to pursue more risky assets such as emerging markets and small cap stocks.
According to Lee Ainslie of Maverick Capital, equity long/short will have better performance as the correlations between securities' returns will be lower. Managers relying on fundamental analysis of corporates will have their positions less influenced by macro economic factors. Other hedge funds are looking at complex strategies for returns. Farallon Capital is investing in distressed European debt, event driven equity in merger arbitrage and US commercial real estate. They are buying foreclosed properties and flipping them to other investors after rehabilitating and finding renters for them. DW Investment Management will continue to hold positions in single corporate credit securities, structured corporate credit, residential and commercial mortgage backed securities and student loan backed instruments. Magnetar Capital will invest in the US energy build out caused by the explosion of hydraulic fracturing.
Subscribe to:
Posts (Atom)