BarclayHedge Blog

Will Funds Migrate Toward More Liquid Strategies as Liquidity Dries Up in Some Credit Sectors?

From the Quarter 1, 2008 issue of "Barclay Managed Funds Report" published by BarclayHedge. The full report also includes 24 hedge fund and managed futures performance ranking tables and in-depth manager profiles. Subscribe. View Roundtables from back issues.

Panel:
John Beech, Financial Risk Management
Scott C. Schweighauser, Harris Alternatives, LLC
Stephen C. Vogt, Ph.D., Mesirow Advanced Strategies, Inc.

Our panel of experts answers these questions:
The media might have us believe that the sub prime debacle and resulting credit crisis spelled doom for the hedge fund industry. The Barclay Fund of Funds Index, however, ended the year +8.86%, proving to the contrary. In your estimation, how were the most successful funds of funds able to weather the storm? Was diversification the key, or do you suspect that there was significant active rotation away from credit exposure (and possibly positioning toward net short credit exposure)? What other strategies were favorable and why?

Some fund of funds managers have employed macro hedges in their portfolios to offset certain exposure or to even take advantage of significant dislocations (e.g., ABX protection, variance swaps, equity options and futures). Do you expect that more fund of funds managers will migrate to this type of overlay strategy, or is it best to leave the trading to the underling managers? What limitations, if any, should investors expect of their fund of funds managers who are engaged in this activity (e.g., trades should only be employed during significant periods of stress, maximum exposure levels to these trades, etc.)?

For a time investors were being paid a handsome premium for taking on illiquidity. Now, however, we are seeing the risk part of the equation in illiquid strategies. To what extent are funds of funds shifting their underlying investments to more liquid strategies? How might increased investor demand for liquidity impact the redemption and lock up terms for fund of funds and the underlying hedge funds?

Prior to the credit crisis, hedge fund and fund of fund IPOs were closing at a rapid pace. Once the markets normalize, how do you expect hedge fund and fund of fund IPO activity to progress? What are the advantages and disadvantages to the manager going public? What are the advantages and disadvantages to the investors?

It seems that the largest funds of funds continue to attract the bulk of the institutional allocations while small funds of funds struggle to grow. In what ways might consolidation be a viable option for smaller fund of funds? Do you expect the trend in consolidations to continue? What are the potential drawbacks of the big funds getting too big?

During 2007, Emerging Markets, Macro, and Merger Arbitrage were among the top performing hedge fund strategies. Over the next 12 months, which strategies do you expect to be the best performers and why? Which do you expect to underperform and why?

Read the complete article and the panelists' answers.

Labels: Barclay Managed Funds Report, Barclay Roundtable

By Elliot Noma, Amal Alibair, and William T. Long of Asset Alliance Corporation

Examines the roles played by factors such as a CTA’s time frame for trades, trading strategy, and quality of in-house research in affecting manager returns.

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From the February 2008 issue of Barclay's Insider Report. Accredited investors can subscribe to the full newsletter for free.

Labels: Barclay Insider Report, CTA, hedge fund research

Commodity Trading Advisor performance for December as measured by the Barclay CTA Index averaged +2.07%. February’s estimate based on the performance of the Barclay BTOP50 Index is +3.97%.

Hedge funds had a down month in January reflected by losses in fifteen of our eighteen indexes. The average return for the 2978 hedge funds (ex. FoFs) that have so far reported a January return is -3.24%. The estimates for February, along with the number of funds reporting for each of our 18 sectors can be found at the link below. These indices are being continually updated as current returns for the underlying hedge funds are recorded into our system. As of this writing, 16 of 18 hedge fund sectors are showing positive returns for February.

Hedge Fund Indices and Managed Futures Indices

From the February 2008 issue of Barclay's Insider Report. Accredited investors can subscribe to the full newsletter for free.

Labels: Barclay Insider Report, commodity trading advisor, hedge funds, managed futures

By Davide Accomazzo, Adjunct Professor of Finance, Pepperdine University, Graziadio School of Business; Principal, Managing Director, Cervino Capital Management, LLC and
Michael Frankfurter, Chief Investment Strategist, Managed Account Research, Inc.; Principal, Managing Director, Cervino Capital Management, LLC

“Is Managed Futures an Asset Class? The Search for the Beta of Commodity Futures” investigates potential sources of return to speculators in the commodity futures market.

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From the February 2008 issue of Barclay's Insider Report. Accredited investors can subscribe to the full newsletter for free.

Labels: Barclay Insider Report, Barclay Insider Report Guest Article, hedge fund research

Commodity Trading Advisor performance for December as measured by the Barclay CTA Index averaged +1.24%. January’s estimate based on the performance of the Barclay BTOP50 Index is +0.84%.

Hedge funds had a positive month in December reflected by gains in fourteen of our eighteen indexes. The average return for the 3005 hedge funds (ex. FoFs) that have so far reported a December return is +0.55%. The estimates for January, along with the number of funds reporting for each of our 18 sectors can be found at the link below. These indices are being continually updated as current returns for the underlying hedge funds are recorded into our system. As of this writing, 14 of 18 hedge fund sectors are showing negative returns for January.
Hedge Fund Indices and Managed Futures Indices

From the February 2008 issue of Barclay's Insider Report. Accredited investors can subscribe to the full newsletter for free.

Labels: Barclay Insider Report, commodity trading advisor, managed futures