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Numis: the listed hedge funds which perform... and those which haven't
by Ewan Lovett-Turner on Oct 06, 2011 at 00:01
The current turmoil in global financial markets raises the question: are we heading for another hedge fund crisis? We believe this is not the case because hedge funds are much better placed to survive than in 2008 due to significantly lower leverage and a lack of pressure from redemptions.
However, there has been a wide dispersion of returns within the listed hedge fund sector reflecting the variety of strategies.
BH Macro has led the way with its net asset value up 12% year to date, driven by profitable interest rate trading, which has benefited from increased volatility. Thames River Hedge+ has been the laggard, down 6.9% year to date, due to mark to market losses on credit positions and exposure to long biased mid cap equities. We have split the sector into three categories with exposures to strategies that we believe are likely to show different return profiles.
Multi-strategy fund of hedge funds, including Dexion Absolute and Absolute Return Trust , provide diversified exposure to the hedge fund sector. We expect these funds to partly insulate investors from market falls, but believe they will experience some correlation to equity markets due to their net long exposure via equity and credit funds.
These funds were hit hard in the liquidity crisis of 2008. However, we believe they are better placed to withstand the current market turmoil, due to lower leverage and the continuing functioning of interbank markets. We believe the listed credit hedge funds provide differentiated ways of playing the credit opportunities, ranging from the recently launched BH Credit Catalysts , which identifies both long and short trading opportunities with a focus on capital preservation, to AcenciA Debt Strategies , which focuses on distressed debt, with a long-bias.
An advantage of the strategy is that the correlation to equity markets is often negligible. Some macro hedge funds have still suffered significant losses this year. However, the large listed macro funds, managed by Brevan Howard and BlueCrest , have delivered strong returns in falling equity markets demonstrating diversified portfolios and strict risk controls.
We believe that investor demand will remain focused on large, liquid funds that have built strong track records of delivering uncorrelated returns and capital protection, such as BlueCrest AllBlue, BH Macro or BH Global .
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- BH Macro GBP (Ordinary Share)
- Thames River Hedge+ GBP (Participating Redeem Pref)
- Dexion Absolute GBP (Ordinary Share)
- Absolute Return Trust GBP (Ordinary Share)
- BH Credit Catalysts GBP (Ordinary Share)
- AcenciA Debt Strategies (Ordinary Share)
- BlueCrest AllBlue GBP 'C' (Ordinary Share)
- BH Global GBP (Ordinary Share)
- BlackRock Absolute Return USD (Ordinary Share)
- FRM Credit Alpha GBP (Ordinary Share)
- GS Dynamic Opportunities GBP C (Ordinary Share)
- Signet Global Fixed Income GBP (Ordinary Share)
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