The August 2015 Eurekahedge Report contains qualitative and quantitative analyses on the industry's assets flows and performance over the past month, with a special feature on key trends in global hedge funds.
The Eurekahedge Hedge Fund Index rebounded this month, up 0.27% in July 2015, while the MSCI World Index was up 1.34%. Returns for Asia ex-Japan were dented this month, down 2.60% as the end of the Chinese equity market euphoria has depressed gains for hedge funds with Greater China exposure. However, European, North American and Japanese equity markets have bounced back from losses in the previous month with developed market hedge fund mandates posting good gains.
Hedge funds bounced into recovery this month - gaining 0.27%, though still underperforming underlying markets as the MSCI World Index gained 1.34%. Equity markets were mostly up this month with the US, European and Japanese equity markets recovering from last month’s losses, while the Chinese equity markets sell-off seemed to show signs of bottoming out following active intervention by the Chinese authorities. Asia ex-Japan suffered their second consecutive month of losses, down 2.60% as its heavyweight Greater China funds were down 8.49%.
The global hedge fund industry has seen a steady increase in its asset growth after experiencing uninterrupted redemption pressure in the second half of 2014, with asset growth totalling US$93.0 billion for the first half of 2015. Much of this growth is attributed to excellent performance-based gains which account for US$51.7 billion, together with continued investor inflows accounting for US$41.3 billion.
On 17 July 2015, the Inland Revenue (Amendment) (No.2) Ordinance 2015 (Amendment Ordinance) was published in the Gazette. The Amendment Ordinance, which takes effect retrospectively from 1 April 2015, extends the existing profits tax exemption benefiting non-residents (offshore funds) to effectively allow offshore private equity funds to take advantage of the exemption.
Several years ago, around 2008, the writer was asked by industry commentators whether the classic Sukuk structures common in the market would finally evolve from ‘asset-based’ structures to ‘asset-backed’ structures that were true securitisations and thus limited in recourse solely to the performance of the assets underpinning them. At the time, this writer thought that such progress was inevitable, particularly given that the move to asset-backed would follow more closely the concepts that were promulgated by the scholars when structuring Shariah compliant issues. Flash-forward to 2015, the industry has not moved on very much from the asset-based structures still dominating the market and asset-backed structures are very few and far between. This raises the fundamental question why such asset-backed structures are still very much a minority and also why the industry has not evolved notwithstanding the continued pressure from scholars to do so.
On July 23, 2015, the Internal Revenue Service (IRS) issued long-awaited proposed regulations discussing the taxation of management fee arrangements commonly used by private equity funds and their management. The proposed regulations address the tax treatment of disguised payments for services under Section 707(a)(2)(A) of the Internal Revenue Code (the Code) where a partner has rendered services to a partnership in a capacity as other than a partner. By specifically classifying certain fee arrangements, including particular carried interest mechanisms, as disguised payments for services, the proposed regulations target purportedly abusive situations where private equity funds use management fee waivers to convert services income, taxable at the ordinary rates, into income items meriting capital gain treatment.
NEW YORK (JULY 16, 2015) - Eurekahedge, the world’s largest independent alternative investment data provider and research firm, and investOrbit, the innovative FinTech investor-manager interaction system, today announced their partnership to help transform and accelerate the manager selection process for thousands of Eurekahedge’s investor clients.
The July 2015 Eurekahedge Report contains qualitative and quantitative analyses on the industry's assets flows and performance over the past month, with a special feature on key trends in European hedge funds and UCITS hedge funds.
The Eurekahedge Hedge Fund Index posted its first losing month in 2015, down 1.19% in June, outperforming underlying markets as represented by the MSCI World Index which was down 2.88% during the month. Despite a strong start to the year, events in Europe and China have dented hedge fund returns in June, with overall 1H 2015 returns coming in at 3.37%, comparable to the 3.11% gain seen over the same period last year.
After five months of consecutive gains, hedge funds posted their first monthly loss in 2015 of 1.19% in June, though comfortably outperforming underlying markets as the MSCI World Index fell 2.88% during the same month. Asia ex-Japan mandated hedge funds suffered their worst month of losses since June 2013, down 1.58% as Chinese equity markets entered into correction during the month. The Shenzhen and Shanghai Composite Indices declined by 11.78% and 7.25% during the month respectively. Talks between Greece and its creditors further overshadowed markets with European managers also posting losses of 1.13% during the month.
The European hedge fund industry has been gaining ground despite the challenging circumstances in the Eurozone region. Given the strong recovery posted by European hedge funds, March 2014 saw the industry’s assets under management (AUM) of US$478.1 billion breach past its October 2007 pre-crisis AUM. The onset of the recent Greek crisis has not deterred AUM growth in the region as AUM continued to climb steadily from 2012 onwards, reaching US$506.8 billion, managed by 4,016 hedge funds in May 2015. On a year-to-date basis, the total AUM of European hedge funds grew US$20.1 billion, largely on the back of performance-based gains which account for roughly two-thirds of the total growth in European AUM in 2015.
The Undertakings for Collective Investment in Transferable Securities, or ‘UCITS’, was designed to meet investor demand for well-regulated instruments monitored by improved compliance standards in the areas of investor protection, regulation and disclosure. The demand for UCITS products grew steadily after the financial crisis as UCITS hedge funds are of interest to investors especially during times of market stress. The regulatory bodies of the EU are continually updating and improving upon the product to maintain its relevance to investors, with the UCITS V being the most recent set of regulations implemented.
Following the implementation of the EU Alternative Investment Fund Managers (AIFM) Directive (2011/61/EC) and associated legislation, Cyprus now lays claim to being a growth jurisdiction within the European Union for the establishment and servicing of boutique and low cost alternative investment funds based locally or offshore. The choice of fund administrator is of paramount importance to the set-up of any hedge fund and in Cyprus there are many reasons to use or establish locally-based operations.
Ireland enacted legislation earlier this year which provides for a new type of corporate fund – the Irish Collective Asset-management Vehicle (ICAV). The ICAV is an innovative corporate structure specifically designed for use as an investment fund. It features a number of specific advantages when compared to previous corporate structures available for use as funds in Ireland, one of the primary jurisdictions for domiciling investment funds in Europe. This article outlines the salient features of the ICAV, highlights its differentiating characteristics and explores the instances where it is most likely to be of assistance to fund promoters in both the traditional and alternative spaces.
In Korea, it has been a very frustrating and painful experience for a market participant with a keen interest having to wait for any significant developments to introduce Islamic finance (in particular, Sukuk) transactions because there has been no public debate or discussion of the bill to amend the Special Tax Treatment Control Act (STTCA) since 2011. This is so true especially after witnessing each successful issuance of sovereign Sukuk by the UK and Hong Kong governments in 2014. Yong-Jae Chang writes.
There has recently been a wave of global regulatory reforms which affect fundraising. These changes are far-reaching and can impact how fund managers structure funds, their proposed investor base, how and where funds are marketed, the remuneration that may be received, registrations that may be required and dealings with investors.
In April and May 2015, Eurekahedge in collaboration with AIMA, conducted a survey of Japanese investors to gauge important insights into market sentiment, investment trends and key regulatory changes facing the Asian asset management industry, with a particular emphasis on the outlook for Japan. 88 investors contributed their insights, with 52% hailing from asset management companies, 21% from hedge funds and fund of hedge funds, 15% from banks, with the remainder from insurance companies and pension funds.
The June 2015 Eurekahedge Report contains qualitative and quantitative analyses on the industry's assets flows and performance over the past month, with a special feature on key trends in Latin American hedge funds.
The Eurekahedge Hedge Fund Index posted its fifth consecutive month of gains for 2015 and was up 0.54% in May while underlying markets as represented by the MSCI World Index gained 0.81% during the month. On a year-to-date basis, hedge funds are up 4.49% with Asian managers leading the tables with gains of 11.44%.
Hedge funds posted their fifth consecutive month of gains, returning 0.54% in May, while the MSCI World Index was up 0.81%. Asian hedge funds were strong performers this month with both Japanese and Asia ex-Japan hedge funds outperforming underlying markets. Japan mandated funds reported gains of 2.06%, followed by Asia ex-Japan mandated funds which were up 1.81% during the month. Indeed, good performance of Asian hedge funds was backed by strong equity market performance in the region. Japanese equity markets performed well during the month with the Nikkei 225 and the Tokyo Topix posting gains of 5.34% and 5.08% respectively.
Latin American hedge funds have been facing dwindling interest from investors over the past few years as they cope with redemption pressure and stagnating performance-based gains compared to other regional mandates. Despite challenges in the Latin American hedge funds space, managers have reported gains of 2.32% in 2014, outperforming the MSCI Latin America Index which was down 4.21% last year amid a difficult market environment.
In new guidance published on 1 June 2015 the AIM Regulation team has clarified its approach to the free float requirement for AIM companies and reminded nominated advisers of the steps they are expected to take to ensure that a company seeking to join AIM has proper policies and procedures in place to enable it to comply with its financial reporting and other obligations under the AIM Rules.
Six things every investor, start-up, financial institution and payment processor should know about the future regulation of Bitcoin and other cryptocurrency derivatives. This article considers the current U.S. derivatives regulatory regime of the CFTC and its applicability to Bitcoin, other cryptocurrencies, and the blockchain protocol. We also discuss practical considerations for those entering the market and what future CFTC regulation of cryptocurrency derivatives and blockchain technology may look like.
As recent figures have shown, after a two-year slump, Asia Pacific’s private equity (PE) sector registered its best-ever performance in 2014, with both deal values and exit activity soaring to a new record of US$81 billion and US$111 billion, respectively (Bain & Co Asia Pacific PE Report 2015).
Segantii Asia-Pacific Equity Multi-Strategy Fund crowned with Best Asian Hedge Fund and Best Asian Multi-Strategy Fund award
The Eurekahedge Asian Hedge Fund Awards 2015 concluded its 12th year at Capella Singapore on 22 May 2015. The event saw a crowd of 310 guests to witness this year’s 98 top performing Asian hedge fund nominees for 2014.
Several new categories included this year were well received and recognised outstanding talent. With a total of 17 awards presented on the night, Segantii Asia-Pacific Equity Multi-Strategy Fund succeeded in attaining the coveted Best Asian Hedge Fund and Best Asian Multi-Strategy Fund award.
The May 2015 Eurekahedge Report contains qualitative and quantitative analyses on the industry's assets flows and performance over the past month, with a special feature on key trends in funds of hedge funds.
Hedge funds edged higher in April to close at another record high, with the Eurekahedge Hedge Fund Index gaining 0.93%. However, hedge funds underperformed underlying markets this month as the MSCI World Index gained 1.25%. Easy monetary policy in Japan and Europe continued to push regional equities into record territory, while US market volatility rose with increasing uncertainty over the Federal Reserve’s timing of interest rate hikes and the outcome of the Greek talks.
Hedge funds posted their fourth consecutive month of gains returning 0.93% in April, while the MSCI World Index was up 1.25%. The NYSE Composite posted gains of 1.38% as of April, despite mediocre retail sales slump figures. Investor optimism fuelled by aggressive stimulus measures by the Chinese central bank is reflected in the strong climb of the CSI 300 Index closing the month of April with gains of 17.85%. With a continued equity rally in Japan headed by Japanese pension funds and further quantitative expansion by Bank of Japan, the Nikkei 225 closed April with gains of 1.63%. Meanwhile, in Europe, the ‘Grexit’ decision has yet to be made as talks towards averting the Greek government default are still in progress.
The global funds of hedge funds sector continued to face headwinds with total assets under management (AUM) of the industry in a steady decline since 2011. As of Q1 2015, the AUM of the funds of hedge funds sectors stands at US$505.9 billion managed by a total of 2,988 funds, having declined by roughly US$300 billion since their 2007 peak of US$808.7 billion.
Playing a role in the Islamic finance sector under the headings of structured products, treasury products and risk management, derivatives are financial assets that derive their value from the performance of another underlying entity such as an asset, interest rate or index. Common forms of derivatives include forwards, futures, options and swaps and they are widely used as a means of efficient hedging and for quick and easy access to a market. However, despite their widespread use in the conventional industry they remain a divisive topic in Islamic finance. A consensus of opinion among Shariah scholars regarding the validity of derivatives under the tenets of Islamic finance has yet to be reached, despite the growing volume of regulation assigned to this particular product.
The SEC signals continued scrutiny of asset management firms for all manner of violations — including technical violations first identified in exams. On February 26, Julie Riewe, the Co-Chief of the SEC’s Asset Management Unit (AMU), delivered a speech to the IA Watch 17th Annual IA Compliance Conference that could fairly be described a “state of the unit” address. Titled “Conflicts, Conflicts Everywhere,” Riewe’s speech highlights the AMU’s focus on what the SEC views as conflicts of interest in all shapes and sizes.
The April 2015 Eurekahedge Report contains qualitative and quantitative analyses on the industry's assets flows and performance over the past month, with a special feature on key trends in Asian hedge funds.
Hedge funds edged even higher in March to close at another record high, with the Eurekahedge Hedge Fund Index gaining 0.78%, outperforming underlying markets as the MSCI World Index fell 0.39%. Easy monetary policy in Japan and Europe continued to push regional equities into record territory, while US market volatility rose with increasing uncertainty over the Federal Reserve’s timing of interest rate hikes and the outcome of the Greek talks.
Hedge funds reported their third consecutive month of gains, returning 0.78% and outperforming underlying markets as the MSCI World Index finished the month down 0.39%. Global equity markets performance was mixed, with overall gains seen in Europe and Japan while US equity markets retreated following weaker durables data signalling that perhaps the stronger dollar is finally beginning to bite into the US economic recovery. Although expected, the Federal Reserve made headlines during the month by dropping the word ‘patience’ from its statement during the month, opening up the possibility of an interest rate hike as soon as June but simultaneously reassuring investors that any rise would be gradual.
The Asian hedge fund industry has kept up a steady pace of growth and returns comparable to that seen over the same period last year, with modest February year-to-date gains of 1.64%. Total assets under management (AUM) increased by US$3.5 billion largely supported by performance-based gains, bringing the total size of the Asian hedge fund industry to US$164.2 billion managed by a population of 1,382 hedge funds.
Qato Capital is an Australian-based alternative funds management group backed by single family office, Larkfield Funds Management. The Market Neutral Long/Short Fund is managed via an objective, consistent and replicable process utilising Qato Capital’s proprietary ‘Q-Score’ methodology. The Q-Score process is fundamentally based, evaluating improving and deteriorating fundamentals within each business from a variety of financial metrics, such as valuation, growth, risk, quality, earnings & price.
Founded in 2003, EuroFin Asia Group is an independent specialty finance house offering investment opportunities across the capital structure spectrum, with a focus on real economy businesses and is located in Singapore and Geneva. Managing open-ended and bespoke credit funds since 2006, EuroFin Asia Group finances a combined portfolio of approximately 100 real-economy companies in the commodity & natural resources sectors across Asia Pacific, Europe & Middle East.
With 25 years experience in trade finance, structured finance and commodities trading, get a flavour of commodity trade finance with Christian Stauffer, CEO at Eurofin Asia Group on how the structural aspects of financial trading funds offer growing opportunities in the Asian banking ecosystem despites the regulations most recently brought by Basel III.
New rules effective from today in the U.K. are likely to have material impact on the tax treatment of payments by a fund to its U.K.-based management executives and service providers. The rules cover many areas of fund manager taxation that previously have not been specifically legislated for in the U.K. Given the haste with which the new rules were constructed and passed into law, it is not surprising that many situations are now being analysed with a degree of concern, in particular where the rules have had some unexpected, and in some cases, potentially negative effects.
The March 2015 Eurekahedge Report contains qualitative and quantitative analyses on the industry's assets flows and performance over the past month, with a special feature on key trends in North American hedge funds.
Hedge funds edged even higher in February to close at another record high, with the Eurekahedge Hedge Fund Index gaining 1.57%, though underperforming underlying markets as the MSCI World Index gained 5.47% after equities surged higher during the month. A return of investor risk appetite and easy monetary policy pushed equities into record territory, while volatility faded away with investors gaining further confidence in the market’s strength.
Hedge funds extended their gains in the second month of 2015, returning 1.57%, although falling behind underlying markets as the MSCI World Index was up 5.47%. Global equity markets rose in unison during February with a return of investor risk appetite as the market downplayed fears of contagion from a possible ‘Grexit’; further supported by accommodative monetary policies from central banks around the world. Volatility faded away along with increased investor confidence and rising equity markets with the CBOE VIX falling from 20.97 to 13.34.
North American hedge funds recorded excellent growth over the past 13 months despite a slowdown in the pace of expansion since the second half of 2014, raising the region’s share of assets under management (AUM) by another US$93.8 billion to approximately two thirds of the global hedge fund industry. As of January 2015, the total AUM of the North American hedge fund industry is closing in on the US$1.45 trillion mark and stands at US$1.447 trillion managed by a total of 5,267 hedge funds.
Launched on 1 July 2014, GCI Systematic Macro Fund has delivered triple-digit return as of the end of February 2015. Taking into account the performance of the managed account which employs the same strategy was started on 3 February in the same year, it has attained 167% as of the end of February 2015.
The Hong Kong government has announced in its latest budget a planned extension of the existing offshore funds tax exemption to bring offshore private equity funds investing in or through Hong Kong, within its scope. The scope of the amendment will not only bring private companies within the exemption, but will also include SPVs which may be Hong Kong incorporated provided they are owned by an offshore person. This is a significant and welcome development for private equity funds investing in or through Hong Kong (typically into China) that will put private equity funds on a par with hedge funds when investing in Hong Kong. It is expected that the government will introduce the draft legislation in the first half of 2015.
Conventional asset management has seen impressive growth over the last few decades and funds have become a well-established financial product. However, Shariah compliant asset management remains a niche within conventional asset management. Why is Islamic asset management, Pierre Oberlé asks, still small and how can it further develop?
The February 2015 Eurekahedge Report contains qualitative and quantitative analyses on the industry's assets flows and performance over the past month, with a special feature on key trends in Islamic funds.
Hedge funds were off to a strong start in 2015, with the Eurekahedge Hedge Fund Index gaining 1.29%, outperforming underlying markets as the MSCI World Index fell 0.41% over concerns about a lack of global demand and Greece’s debt problems. This atmosphere of uncertainty and central bank activity contributed to heightened market volatility, which picked up in the first trading month of the year. US equities witnessed their largest loss since January 2014, underperforming global markets significantly as concerns over the strong US dollar and declining growth overseas weighed in on regional markets despite the strong economic picture in the US.
Hedge funds started 2015 on a good note, gaining 1.29% and outperforming underlying markets as the MSCI World Index slipped 0.41%. Global equity markets displayed mixed performance in January as the economic picture remained weak with fears mounting about a lack of global demand and high sovereign debt burdens. Volatility also rose as central bank actions dominated the markets during the month, with the CBOE VIX Index rising from 19.2 to 20.97 amid this atmosphere of uncertainty.
Islamic finance plays a key role in the global economy, covering the financial needs of the currently underserved Muslim population. With Muslims forming a quarter of the world’s population, this is potentially a very large market, yet less than 1% of financial assets are Shariah-compliant. Indeed, there appears to be a clear supply imbalance and the Islamic fund industry has been growing steadily over the years to accommodate this demand. While it does not seem likely to have reached a peak, the industry is projected to grow significantly larger driven by a younger generation of Muslims who are more open towards investing in financial assets, and also by wider increases in productivity and prosperity.
Shareholder activism has increased significantly over the past several years, and many companies who once believed they were too small to attract the attention of activist shareholders more and more frequently find themselves in the middle of a proxy contest or responding to shareholder proposals, among other things.
Though relatively underdeveloped compared to some other Western jurisdictions, namely the UK and the
US, Islamic finance is making small but steady strides in the Canadian market. Rehan Huda discusses the
correlation between the growth in size and affluence of the Canadian Muslim community and growth in the level of observance, leading to more vocal demand for Islamic fi nancial products and services.
Week two of the new year marked a significant step in the development of the European Private Placement Market. The Loan Market Association (LMA) launched template documents for use in European private placement transactions. The development of standardised documentation will improve the visibility and perception of the product and might provide the European private placement market with the potential to grow, in time, into a notable competitor to the US market.
The January 2015 Eurekahedge Report contains qualitative and quantitative analyses on the industry's assets flows and performance over the past month, with a special feature on key trends in global hedge funds.
Hedge funds finished 2014 up 4.46%, with the Eurekahedge Hedge Fund Index gaining another 0.14%, outperforming underlying markets as the MSCI World Index fell 0.80% in December after equities retreated from their intra-month heights. Further steep falls in oil prices and fears of a global slowdown contributed to an atmosphere of uncertainty, which caused volatility to pick up in the final trading month of the year as the market traded in a choppy sideways manner.
Hedge funds rounded up the final month of 2014 in positive territory, up 0.14%, outperforming underlying markets as the MSCI World Index lost 0.80%. Global equity markets largely traded sideways to end December in negative territory, fuelled by further steep falls in oil prices and fears of a global slowdown. Volatility also picked up in the final trading month of the year amid the atmosphere of uncertainty - reflected in the CBOE VIX Index which rose 44.04% to 19.2 during the month of December. Most of the salient macroeconomic themes from November maintained their relevance going into December; mainly the fall in oil prices and the impact of divergent central bank policies.
Global hedge funds have maintained a steady pace of growth building upon the strong gains seen in 2013, with new investor allocation activity totalling US$40.8 billion in the first eleven months of 2014. Combined with excellent performance-based gains of US$76.5 billion delivered by hedge fund managers, this puts the current assets under management (AUM) of the industry at US$2.13 trillion – another new high.
India focused hedge funds have posted spectacular returns in 2014 against the backdrop of rising domestic equity markets, and a renewed sense of confidence in the Indian economy which is being led by Narendra Modi. Hedge funds investing with an Indian mandate have topped the performance tables in 2014 and in this special section of The Eurekahedge Report, we ask some of the top performing Indian hedge fund managers about their winning themes during the year, in addition to investor allocation activity and the key macroeconomic themes which they will be watching out for in 2015.
Gen2 Partners (Gen2) is one of the leaders in customised Asian Hedge Funds for Institutional Investors and Family Offices, in addition to being a trusted partner to help manage investors’ exposure to Asia across all Asian alternative strategies.
Switzerland has always been an attractive and relatively easily accessible market for the distribution of foreign funds. As at end-November 2014, the total volume of funds registered for sale to retail investors (including institutional share classes) amounted to more than CHF 850 billion. This is not the total market picture, however, as according to the Swiss National Bank, at the end of 2014 another approximately CHF 800 billion have been privately placed into securities accounts of Swiss and foreign private HNWI'’s and institutional clients held with banks in Switzerland.
Enormous, diverse, rich in resources but historically underserved and overlooked by the financial services sector, Africa has a Muslim population of over 400 million. A nascent Islamic finance industry is gradually emerging across the continent, invigorated by the strengthening of economic links and increased trade between Africa and the rest of the world. – with the Middle East especially playing an important role in bringing vital investment into rapidly developing countries. Patrick Colegrave and Joanna Hossack look at the current climate for the industry, and how this can continue and increase in the coming years.
Last year at about this time in December, we were still working our way through the final Volcker Rule. A year has passed and we are still attempting to understand the exceptions that may be available in connection with hedging of exposures arising in connection with the issuance of structured products. We anticipate that there will be additional regulatory guidance on the Volcker Rule. In fact, in their public statements, Federal Reserve representatives have alluded to possible changes relating to the metrics and compliance policy requirements.