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Top 5 Hedge Fund Technology Challenges All Blown Away by the Cloud

Top 5 Hedge Fund Technology Challenges All Blown Away by the Cloud

Author: Peter Curley of Xignite

The year 2011 proved to be yet another lackluster year for the hedge fund industry. There are any number of possible explanations for why the average hedge fund lost 4.8 per cent including increased volatility, lack of focus, crowded strategies, and regulation. Whatever the precise reason for this continued poor performance, it is likely that the hedge fund industry has only a limited amount of time to get back to the glory years of consistently providing absolute returns, before it risks a significant outflow of assets under management.

The adoption of an on-demand market data cloud instantly benefits the hedge fund industry because it allows firms to address the top 5 hedge fund technology challenges.

This post is the first in a multi-part series that describes the top 5 hedge fund technology challenges all blown away by the market data cloud. In subsequent posts we will examine each of the five hedge fund technology challenges in greater detail.

Hedge Fund Technology Challenge #1
Focusing on alpha generation, not market data management
Now more than ever hedge fund managers need to be laser-focused on their core responsibility of alpha generation. Distractions such as reporting, IT management, and just the general business of running a hedge fund all play a role in reducing the hedge fund industry’s focus on the investment management process. With an on-demand market data cloud all the headaches involved with building and maintaining a market data infrastructure are removed.

Hedge Fund Technology Challenge #2
Expanding the universe of alpha generation possibilities
Hedge funds compete in a world where alpha generation opportunities have become more fleeting and dispersed than ever before. In this new world firms require a market data solution that allows them to quickly analyze a broad set of opportunities wherever they may be. The market data cloud model expands the universe of alpha generation possibilities by putting vast arrays of global and multi-asset class market data right at the fingertips of hedge fund managers.

Hedge Fund Technology Challenge #3
Bringing instant transparency to regulatory and investor reporting
The job of a hedge fund manager has become infinitely more complex with demands for improved transparency coming from seemingly every direction. For many firms this has meant onerous reporting requirements, made even more difficult by inflexible systems, and an inability to quickly access accurate market data. An on-demand market data solution, that offers comprehensive coverage of real-time, historical, and reference data, allows firms to instantly enrich their regulatory and investor reporting.

Hedge Fund Technology Challenge #4
Getting new funds up and running in record time
The health of the industry depends on relatively low barriers to entry for new hedge fund entrants, because as we know, size kills alpha. A major barrier for new funds is the sourcing of baseline market data, and the requirement to build out a market data infrastructure. Adoption of the market data cloud allows new startup hedge funds to focus on other more important tasks so that they can launch sooner, and begin to establish their track records.

Hedge Fund Technology Challenge #5
Add market data quickly to Excel modeling and reporting
Let’s face it most of the hedge fund industry’s important activities such as modeling and reporting are still done in Microsoft Excel. An on-demand solution means no more time wasted wrestling with market data feeds or files. The market data cloud allows firms to quickly add the market data they need, in the format of their choice, for all their Excel modeling and reporting.

The next blog in this series will be “Hedge Fund Technology Challenge #1  – Focusing on alpha generation, not market data management”.

To learn more about the Xignite Market Data Cloud for Hedge Funds email us at sales@xignite.com or call 1.866.XML.SOAP.


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Asia Family Offices

Asia Family Offices

The Rise of Family Offices Investors in Asia

I was recently interviewed by Investments and Pensions in Asia for a story on the increase in family offices in Asia.  I visited Singapore only a few months ago, so I was able to share my insights based on my travels in the region (the picture to the left is from a video I recorded while in Singapore).

The article, Family offices on the rise in Asia, explains this trend in Asia and gives some good insights into how family offices have emerged in the region to serve high net-worth individuals. As I mention in the article, I see Asia--Hong Kong and Singapore in particular--as a emerging hot spot for family offices--and for hedge funds looking to raise capital from these investors--in the coming years.  You can read an excerpt of this article here or read the full article at the IPA website.
The number of high net-worth individuals (HNWI) in Asia-Pacific in 2010 had exceeded that of Europe, and is nearing that of North America, according to Capgemini and Merrill Lynch’s 2011 Asia-Pacific Wealth Report. The Asia-Pacific HNWI population grew 9.7%to 3.3million in 2010, with a total wealth of $10.8 trillion, according to the report.

“I do see more family offices being formed in Asia, specifically in Hong Kong and Singapore more than elsewhere,” says Richard C. Wilson, head of the 31,000-member Family Offices Group association. Globally, the majority of family offices are focused primarily on capital preservation, but those in Asia buck this trend.

“There is such a high concentration of first generation wealth in the region that many ultra-wealthy still have an appetite for further growth. The focus is really balanced between preserving a good amount of capital, but also putting some capital at risk for the hope of further growth,” Wilson says. The ultra-wealthy behind these family offices are almost always business owners, he says.

The growing interest in family offices in Asia reflects the increase in wealth and sophistication in the region, Katie Graves, an attorney at Withers in Hong Kong, tells IPA. “For many families in Asia, the family office is effectively a trusted family adviser operating out of the chairman's office of the family business.” Read More

Be sure to check out FamilyOffices.com for our family office database and our free book on family offices.

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http://richard-wilson.blogspot.com/2012/02/asia-family-offices.html

Hedge Funds Euro Zone

Hedge Funds Euro Zone

Some Hedge Funds Prepare for Euro Zone Break-up

A potential break-up of the Euro Zone has been keeping some hedge fund managers up at night, wondering how best to protect their funds from this worst-case scenario.  Managers have set about stress-testing their portfolios for this event and looking for ways to minimize their pain if a break-up ever occurs.
With talks on restructuring Greece's debt mountain still deadlocked, and the exit of one of more countries from the euro seen as a small but definite possibility, funds are modelling scenarios ranging from a 50 percent slump in European stocks or a 45 percent fall in the oil price to a 30 percent rise in gold. 
Managers are also trying to dig out old computer programmes they once used to model the behaviour of currencies such as the drachma or the deutschmark as they prepare for an event for which -- even after the 2008 collapse of Lehman Brothers -- they effectively have no precedent. 
Many, having already trimmed risk, are piling into credit default swaps or deeply out-of-the-money options, hoping they pick a counterparty that can withstand the shock of a break-up.
"You can't conceive what this event will be like, but it doesn't absolve you of looking at it," said the chief risk officer at one hedge fund firm who asked not to be named. Source

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http://richard-wilson.blogspot.com/2012/02/hedge-funds-euro-zone.html

Data Explorers Hedge Fund App

Data Explorers Hedge Fund App

iPhone App Lets Managers Stay on Top of Shorting Activity

A new app for the iPhone allows hedge fund managers and other traders to view shorting activity and stock movements.  This is part of a larger trend among hedge fund managers and employees who want access to securities lending data on multiple platforms.  Hedge fund managers have a busy schedule and this app relies on information from lenders, brokers and hedge funds to keep managers updated even when they're out of the office.
An iPhone app to enable hedge funds to view shorting activity and stock movements on the go has been developed by securities lending data provider Data Explorers. 
The app provides access to daily information on 3 million transactions compiled from information Data Explorers receives from agent lenders, prime brokers and hedge funds engaged in securities financing. 
A lot of people are interested in what the short position is for a particular stock, be it prior to the morning call, at lunchtimes or as they are out talking to customers, according to Jonathan Morris, chief operating officer at Data Explorers. The app is able to identify key movements in stock lending, he adds. Additional analysis and other information is also available using the app. 
According to Morris the response to the launch of the shorting app has been strong, with more than 100 of its hedge fund, prime brokerage and agent lender clients based in Europe, the US and Asia already using it.  Source

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http://richard-wilson.blogspot.com/2012/01/data-explorers-hedge-fund-app.html

Hedge Fund Liquidity 2012

Hedge Fund Liquidity 2012

SkyBridge's Gayeski on Hedge Fund Liquidity in 2012

Hedge fund liquidity might be turning a corner, says Troy Gayeski, senior portfolio manager at SkyBridge Capital LLC. In the following video with Bloomberg TV, Mr. Gayeski talks about liquidity for hedge funds, high-yield bonds and how the government has been working to boost housing. If you are reading this via RSS or e-mail, please click here to watch the video.



If you are interested in watching another video on Hedge Fund Liquidity, please click here.

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http://richard-wilson.blogspot.com/2012/01/hedge-fund-liquidity-2012_30.html

Hedge Fund Liquidity 2012

Hedge Fund Liquidity 2012

SkyBridge's Gayeski on Hedge Fund Liquidity in 2012

Hedge fund liquidity might be turning a corner, says Troy Gayeski, senior portfolio manager at SkyBridge Capital LLC. In the following video with Bloomberg TV, Mr. Gayeski talks about liquidity for hedge funds, high-yield bonds and how the government has been working to boost housing. If you are reading this via RSS or e-mail, please click here to watch the video.



If you are interested in watching another video on Hedge Fund Liquidity, please click here.

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Link to This Resource: Hedge Fund Liquidity 2012

http://richard-wilson.blogspot.com/2012/01/hedge-fund-liquidity-2012.html

Currency Hedge Funds

Currency Hedge Funds

Currency Funds May Face Investor Backlash After 2011

Hedge fund investors are gradually moving away from currency funds in response to poor returns from currency-focused strategies in the last year.  Toward the end of 2011, investors withdrew money from smaller currency and placed their capital with larger funds, but most currency funds suffered some losses last year with the debt crisis and large fluctuation between different currency values.
In the final months of 2011, hedge-fund investors withdrew from smaller hedge funds, which are more likely to be currency specialists, and plowed money into bigger funds that invest across many markets. The net outflow from funds managing between $250 million and $500 million was $989 million in the fourth quarter, while funds that oversee over $5 billion saw an inflow of $6.8 billion, according to Hedge Fund Research Inc. 
Last year was tough for hedge funds of all shapes and sizes, particularly the summer months. Europe's sovereign debt crisis and the political battle over reducing U.S. debt made markets hard to predict. Prices of financial assets tended to move in lockstep, making it hard for money managers to diversify. 
The HFR data suggest some investors may have moved cash from smaller specialist funds to bigger, more mainstream funds after the third quarter's turmoil, most likely because bigger funds often make investments across markets and are perceived as sturdier. 
"In a risk-averse environment, people are more inclined to invest in generalist managers," said Kenneth Heinz, president of HFR. Source

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http://richard-wilson.blogspot.com/2012/01/currency-hedge-funds.html

Hedge Funds Greek Bonds

Hedge Funds Greek Bonds

Hedge Funds Look to Unload Stockpile of Greek Bonds

While some hedge funds with large amounts of Greek debt have turned to the courts to turn a profit on Greek debt after news of a probable haircut, other hedge funds are simply trying to exit the position selling off Greek debt as fast as possible.  This is according to traders and brokers, many hedge funds bought Greek debt (some $5.2 billion worth) last month but now they are trying to offload those bonds ahead of their March 20 maturity date.
Hedge funds that in the last month or so have purchased an estimated 4 billion euros ($5.2 billion) of beaten down Greek bonds that mature on March 20 are now trying to unload their positions, according to brokers and traders. 
That is because it is becoming clear to one and all that Greece — under pressure from its financial backers — is preparing to impose a broad-based haircut that would hit all investors with a loss of 50 percent or more, whether they agree to the deal or not. 
The problem is that while buying the bonds over the last few months was easy, as many European banks were unloading their positions, getting out now is proving to be near impossible. Liquidity has dried up and investors are avoiding Greek paper as if it were the plague. 
The poor outlook for early maturing Greek bonds was compounded on Wednesday when Christine Lagarde, managing director of the International Monetary Fund, said the public sector might have to participate in a restructuring deal with private sector creditors. Source

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http://richard-wilson.blogspot.com/2012/01/hedge-funds-greek-bonds.html

The Costs of Starting a Hedge Fund

Costs of Starting a Hedge Fund

The Costs and Compliance of Starting a Hedge Fund

I recently came across the following video interview with Ingrid Pierce, a partner at Walkers, a law firm specializing in starting a hedge fund.  Ms. Pierce speaks on the costs and compliance of starting a hedge fund, such as registration costs and the costs of keeping up with regulations and compliance.  The time it takes to start a hedge fund is a big factor that Ms. Pierce advises her clients to factor into their decision, as it often takes a longer time to start a hedge fund than people expect.  Also, she talks about factors such as hiring a fund administrator and different investor classes. If you are reading this via RSS or email, please follow this link to view the video.



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Link to This Resource: The Costs of Starting a Hedge Fund

http://richard-wilson.blogspot.com/2012/01/costs-of-starting-hedge-fund.html

Hedge Fund Redemption Requests

Hedge Fund Redemption Requests

Hedge Funds See Record-Low Redemption Requests

Hedge fund redemption requests fell to record-lows as investors decided to keep their money with their current managers.  Two factors have been attributed to this trend: first, the improving market conditions and investor sentiment; second, the seasonal drop in asset reallocation, according to GlobeOp.
Redemption requests by hedge fund clients have fallen to the lowest monthly level on record as improving market sentiment combined with a typical seasonal lull in asset re-allocation, data shows. 
The GlobeOp Forward Redemption Indicator, a monthly snapshot of clients giving notice to withdraw their cash as a percentage of GlobeOp's assets under administration, measured 1.85 percent in the January report, down from 4.58 percent in the December report, which shows requests to redeem funds in January, which is typically a period of heavy re-allocation. 
That is the lowest recorded since the January report in 2008, when GlobeOp began compiling the index. 
January report notifications were also substantially lower than the same time last year, when requests stood at 2.79 percent. 
"It's more to do with a reallocation of investments. People take money out in January and redeploy it in February and March," GlobeOp Financial Services (GO.L) Chief Executive Hans Hufschmid said. Source

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http://richard-wilson.blogspot.com/2012/01/hedge-fund-redemption-requests.html

Hedge Funds Sue Greece

Hedge Funds May Sue Greece

Hedge Funds Look to Sue Greece over Bond Payments

Among the many solutions discussed by the hedge funds looking to prevent a Greek debt restructuring was an interesting, although not very feasible solution: sue Greece in the European Court of Human Rights.  This highlights the lengths at which these funds might go to ensure bond payments from Greece.  Greece is considering legislation that would force private bondholders to suffer losses, not including its largest bondholder: the European Central Bank.
The novel approach would have the funds arguing in the European Court of Human Rights that Greece had violated bondholder rights, though that could be a multiyear project with no guarantee of a payoff. And it would not be likely to produce sympathy for these funds, which many blame for the lack of progress so far in the negotiations over restructuring Greece’s debts. 
The tactic has emerged in conversations with lawyers and hedge funds as it became clear that Greece was considering passing legislation to force all private bondholders to take losses, while exempting the European Central Bank, which is the largest institutional holder of Greek bonds with 50 billion euros or so. 
Legal experts suggest that the investors may have a case because if Greece changes the terms of its bonds so that investors receive less than they are owed, that could be viewed as a property rights violation — and in Europe, property rights are human rights. Source

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Relative Arbitrage Investors

Macro Relative Arbitrage Investors 

Hedge Fund Investors Look to Macro and Relative Arbitrage

Hedge fund investors continued to place their money with hedge fund managers in the final quarter of 2011, despite a relatively volatile year for hedge funds and the markets in general.  After surpassing the $2 trillion milestone in Q1, assets fell below that mark as the year progressed only to finish at $2.01 trillion.  Hedge fund investors focused most of their money on macro and relative arbitrage investors, withdrawing from equity funds in Q4.
After a shaky start to the year, investors contributed more money in the fourth-quarter to their favorite hedge fund managers, according to a yearly review released today by Hedge Fund Research Inc. The report found that: 
Total capital invested in the hedge fund industry regained the $2 trillion milestone.
The industry originally eclipsed $2 trillion in assets under management in the first-quarter, then peaked at $2.04 trillion at mid-year before declining to $1.97 trillion to end a volatile third-quarter. 
Total hedge fund AUM finished the year at $2.01 trillion, as Q4 performance gains offset a nominal net capital outflow of $127 million. 
For the full-year 2011, investors allocated $70 billion of net new capital to hedge funds.
HFR’s report termed it “a volatile performance year.” 
The HFRI Fund Weighted Composite Index declined by 5% percent, only the third calendar year decline since 1990.  Source

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Hedge Fund Greek Debt

Hedge Fund Greek Debt

Hedge Funds May Prevent Greek Debt Restructuring Deal

Reports suggest that five hedge funds threaten to upend the Greek debt talks.  The funds--reportedly New York's York Capital Management, Marathon Asset Management and Och-Ziff Capital Management Group, Florida's GreyLock Asset Management and Europe's Vega Asset Management--could prevent a restructuring deal for Greece unless they are guaranteed a "significant profit" on Greek bonds they purchased.
New York's York Capital Management, Marathon Asset Management and Och-Ziff Capital Management Group, Florida's GreyLock Asset Management and Europe's Vega Asset Management vowed to prevent a restructuring deal from going through if they were not guaranteed a significant profit on Greek bonds they bought at distressed prices, sources familiar with the talks told the British newspaper The Independent. 
The deal must go through this month or Greece could default as early as March, economists and policymakers said. 
With default pressure mounting and a European finance ministers' summit set for Monday, Greek and international officials signaled Tuesday they would yield to the bank and hedge fund demands to secure a bond deal this week, the British newspaper The Daily Telegraph reported.
Charles Dallara, managing director of Washington's Institute of International Finance, a bank lobby that represents private-sector bond holders, was in Athens Wednesday to try to agree on a deal before the Monday summit.Read more

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2012 Market Data Industry Outlook - 4 Major Trends all Leading to the Cloud

2012 Market Data Industry Outlook

4 Major Trends all Leading to the Cloud

By Peter Curley of Xignite.


In 2011 the cloud finally went from an unproven curiosity to an accepted mainstream technology solution. In 2012 we will witness the deepening penetration of the cloud into the consciousness of multiple industries.  The market data industry is an interesting case in point because the major industry trends are all pointing to the rapid adoption of an on-demand cloud-based market data solution.

Let’s review each of these trends individually to understand how important the cloud will be for the market data industry in 2012:

1. Market Data Supplier Economics

The suppliers of market data are in a state of flux. On one hand, the cost of business is soaring with the new technology resources required to support sky-rocketing message rates, microsecond execution, and new regulation. On the other hand, the exchanges are experiencing sluggish revenue growth. Traditionally exchanges had four distinct sources of revenue: 1.) execution; 2.) listings; 3.) clearing; and 4.) market data. Of these, only market data is growing, while the others have either completely dried up or are not likely to be a significant source of revenue in the future.  The exchanges have responded to these unfavorable economics with a wave of consolidation in an attempt to reduce costs but the health of the industry depends on growing the revenue side of the equation. The exchanges understand that their best revenue strategy is to distribute their most valuable asset, market data, direct to consumers. This strategy has already seen success with the exchanges offering direct feeds, co-location, and other services to their low-latency clients.

In 2012 we will see more exchanges begin to focus on the largely untapped segment of consumers who need market data, such as historical trade and quote data, but are not latency sensitive. This is potentially a huge revenue source for the exchanges and is ideally suited to the on-demand market data cloud. Forward-thinking exchanges such as CME DataCloud, Direct Edge EdgeBook Cloud, and NASDAQ Data-On-Demand, have already moved in this direction, but 2012 will be the year that many more exchanges embrace the market data cloud to sell directly to consumers.

(Read more about how the exchanges are embracing the cloud in our recent blog post - Cloud Strategy for Exchanges and Financial Markets.)

2. Market Data Consumer Economics

As with the suppliers of market data, consumers are also facing an uncertain future. For many consumers, particularly in the financial services industry, the whole process of data management has become overwhelming. The old model of bringing all market data in-house, so that it can be accessed quickly, is under considerable pressure. There is now simply too much data to do this cost-effectively. Another related issue is time to implementation. With intense competition, many investment firms require immediate access to global and multi-asset class market data. Unfortunately, the traditional method of having a vendor add a feed can be a very slow process. Investment firms require a much more nimble solution that allows them to quickly access discrete data sets.

In 2012 we’ll see more firms conclude that not all data should be brought in-house. This change in mindset will lead firms to become much more discerning about what data should be stored locally, and what data should be retrieved on an ad-hoc basis from a market data cloud.

3. Proliferation of Mobile Devices

It is clear that we are in the midst of a technological sea change as the world moves from an Internet that is tethered to desktop PCs, to one that can be accessed from anywhere, through a wide array of always-on smartphones and tablets. Many experts predict that by 2014 mobile Internet usage will overtake desktop Internet usage. Already in late 2011 we saw mobile-based local search overtake PC-based search. The mobile Internet revolution will affect the market data industry greatly as apps and websites designed specifically for these devices demand more and more market data. An on-demand market data cloud is ideally suited for this mobile revolution because mobile apps typically require only discrete on-demand data sets and app developers are not inclined to build their own data management infrastructures. In 2012 the market data industry will experience a huge uptick in demand from theses mobile devices.

(Read more about the proliferation of mobile devices as it relates to the buy-side The 3 Phase Evolution of Buys-Side Mobile Apps.)

4. Regulation

Regulation is always a factor in any discussion on trends in the market data industry. 2012 will be no exception, particularly because many of the regulations that were proposed in direct response to the financial crisis of 2008, will either be implemented, or will be at a point in the approval process where we will have a better sense of their likely impact. The main thrust of new regulations such as Dodd-Frank, the Volcker Rule, and Basel III, is to manage systemic risk and to force transparency across the financial services industry. All of the important industry players will be significantly impacted including the exchanges, the buy-side and the sell-side.  Complying with these new regulations will involve onerous and costly reporting requirements. These regulatory requests for data will serve to accelerate the adoption of on-demand cloud-based market data solutions because many of the players simply do not have the resources necessary to comply with these and future regulations. It is also likely that regulators themselves will favor cloud-based market data because it will promote industry best practices and transparency.


2012 will certainly be a year to watch for the market data industry and the adoption of the on-demand market data cloud model.  We can expect to see the 4 major trends outlined above to all converge to make this the year of the market data cloud.

This guest post was submitted by Peter Curley of Xignite a hedge fund market and reference data provider.

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Hedge Fund Investors 2012

Hedge Fund Investors 2012

1/6 of Investors to Move their Money from Current Manager

One sixth of the current hedge fund investors who participated in a recent Barclay's survey are less than satisfied with their current manager and expect to move their money next year to a different manager. The expected large shift in assets illustrates the challenges that many hedge funds will have in preventing in convincing their investors that performance will be better in 2012 and that they should keep their money invested with their current manager.
Hedge fund investors are likely to move almost a sixth of their cash into the hands of different managers in 2012, a report on Friday showed, as firms in the $2 trillion sector grapple with winning back the confidence of clients hurt by losses in 2011.

The report, conducted by Barclays (BARC.L) Capital, expects investors will move around $300 billion of assets from one strategy to another, or between different managers in the same strategy, next year.

Investors will also put some $80 billion of new money into the industry, according to the report, titled 'The Money Trail'.

This would constitute the largest annual net flow of assets into hedge funds since the financial crisis, but is still less than half the $195 billion investors ploughed into the industry in 2007, the report showed. Source

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Brevan Howard Top Hedge Fund

Brevan Howard Top Hedge Fund

Brevan Howard Lands in Top 100 Hedge Funds 4 Times

Brevan Howard has become a monster in the hedge fund space, perhaps the best evidence of this is the fact that four Brevan Howard hedge funds appeared in the Bloomberg Markets list of the top 100 best-performing hedge funds of 2011.  Bloomberg did a nice piece on Brevan Howard and how Alan Howard has steered that firm toward consistent success in the industry.
Today, the co-founder of the $32.6 billion hedge-fund juggernaut Brevan Howard Asset Management LLP still makes it his business to keep out of harm’s way. From Howard’s trading desk in Geneva, former colleagues say, he obsesses daily about fat- tail risks, black swans or the mere possibility that his economic outlook may be wrong.

In 2011, Howard’s risk aversion served him well. The $26.4 billion Brevan Howard Master Fund Ltd. returned a solid 10.8 percent for the 10 months ended Oct. 31, ranking the fund No. 20 in the Bloomberg Markets ranking of the 100 best-performing hedge funds.

The firm had three other funds on the large-fund list: the $1.7 billion Brevan Howard Asia Master Fund Ltd., at No. 31 with a 7.2 percent return; the $1.3 billion Brevan Howard Multi- Strategy Master Fund Ltd., tied at No. 43 with a 5.5 percent return; and the $2 billion Credit Catalysts Master Fund Ltd., tied for No. 74 with a 3.2 percent return. Source

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Hedge Funds Bonus 2011

Hedge Funds Bonus 2011

Hedge Funds Predict Year-End 2011 Bonuses to Decline

Hedge funds are banking on smaller year-end bonuses for 2011 despite a slight increase in compensation for the year.  It was a less than stellar year for many hedge funds, with just 16% of those surveyed in a recent compensation report saying their fund had double-digit performance, compared to 45% the previous year.
The 2012 Hedge Fund Compensation Report is based on data collected directly from hundreds of hedge fund managers and employees during October and November 2011. 
It revealed that average reported cash compensation for staff in the industry for 2011 was $311,000, just slightly higher than the previous year's compensation. 
However, those surveyed said they expected bonuses to be down for 2011, given a substantial decrease in year-on-year performance. Only 16% of respondents reported double-digit returns for their fund for the year to the date of the survey, compared with 45% the previous year. 
According to a UK-based headhunter, most hedge fund employees are likely to be told the amount of their bonus this month, and will be paid it in February or March, on the condition that none of it has been deferred.  Source

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Hedge Funds IMF

Hedge Funds IMF

Hedge Funds Spar with IMF over Greek Debt

A proposed IMF plan to swap Greek bonds and thus relieve some of the debt burden for Greece has run into a wall: hedge funds.  Hedge funds have built up a strong position on the Greek bonds and several are reportedly unwilling to agree to a solution that would involve a bonds swap.  However, if a deal does not materialize in time, Greece stands to lose out on its second bail-out package.
Bondholders need to give up some 100 billion euros ($130 billion) of their investment in the planned bond swap, drawn up in October, but many hedge funds plan to stay out of it. 
They either prefer letting the country go under, which would trigger the credit insurance they have bought, or hope to get paid out in full if enough others sign up. That puts them in direct conflict with the IMF, which wants to force Greece's cost of financing down to an affordable level. 
"The play is purely 'they'll be forced to pay me'. Greece will want to avoid a wider default. so if it managed to restructure 80 percent of the deal and pay the rest that's still better," said Gabriel Sterne at securities firm Exotix. 
Without a deal, the IMF, the European Union and the European Central Bank -- the so-called troika of official lenders -- will not pay out a second bail-out package Greece needs to survive.
EU Economic and Monetary Affairs Commissioner Olli Rehn said on Tuesday that negotiators were "about to finalize shortly". But time is running out. Source

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Hedge Funds Bullish Oil

Hedge Funds Bullish Oil

Hedge Funds Back to Being Bullish on Oil

Hedge funds are resuming bullish bets on the price of oil amid instability in the Middle East--particularly growing tension with Iran--and expected rising US demand.  A worsening dispute with Iran and signs of a recovering US economy have led many hedge funds to bet on a increase in the price of oil.  The shift comes after hedge funds largely exited the oil market in the final months of 2011.
Hedge funds that exited oil markets late last year have begun boosting bullish bets as tensions with Iran and reports of U.S. economic growth sent crude to the highest price since May.

The funds increased bullish positions 4.1 percent in the week ended Jan. 3, according to the Commodity Futures Trading Commission's Commitments of Traders report. Open interest advanced 3.5 percent, rising for a second week after falling in December to the lowest since May 2007, according to the CFTC.

While the 8.4 percent increase in oil last year marked the smallest annual move since 2006, the swing proved too much for some money managers as Europe's sovereign debt crisis pushed prices down to $75.67 a barrel before rising to $103 as Iran threatened to block the Strait of Hormuz. Clive Capital LLP's $4 billion commodity hedge fund told clients in November that they moved to cash because commodities had become too volatile, according to two people with direct knowledge of the firm's performance.
Read more

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Hedge Funds Performance 2011

Hedge Funds Performance

Hedge Funds Performance Falls Further in End of 2011

Hedge funds suffered another off month in 2011, as December performance dipped 0.9%.  The total performance of the The Bloomberg Aggregate Hedge Fund Index was -4.9%, worse than the S&P Index.  Hedge fund strategies hit particularly hard were long/short and macro.
Hedge funds sank almost 5% last year amidst market volatility and the European sovereign debt crisis.

The Bloomberg Aggregate Hedge Fund Index ended 2011 down 4.9% after a 0.9% decline in December. By contrast, the Standard & Poor's 500 Index ended the year essentially flat.

Most of the industry's losses were suffered in September, when the Bloomberg index fell 4.7%.
Among major hedge fund strategies, long/short equity funds suffered the worst December, falling 1.6% to end the year down 6%. For the year, macro funds did even worse, losing 6.5% despite a 0.3% jump last month. Multistrategy funds lost 1.1% in December and 2.9% in 2011. Source

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Hedge Funds Malta

Hedge Funds Malta

Malta Successfully Luring Hedge Funds to Its Attractive Shores

It's hard to make the case for spending all your time working in, say, Connecticut, when you could be working from Malta.  At least for a collection of hedge funds, it has been too tempting to resist moving their offices to Malta, a Southern European country known mostly for its spectacular beaches and warm weather, but perhaps even more importantly to hedge fund managers, it is a European Union member at a time when the EU has taken up new initiatives to monitor and regulate hedge funds.

To give you an idea of the hedge fund migration to the country: Malta's prime minister
recently fretted that there weren't enough local accountants and financial analysts to keep up with the rising need. 
Erik Nelson was working in Stamford, Connecticut, as a research analyst at FMG USA LLC, the U.S. arm of FMG, a fund of funds specializing in emerging and frontier markets, when his bosses called him into a meeting in September 2009.

They had recently moved FMG’s corporate headquarters to Malta from Bermuda and now they wanted Nelson, 27 at the time, to head up the new office. “I’ll have to think about it,” Nelson replied. Then he went home and tried to find Malta on a map.

Three months later, the young American touched down on the rocky, sun-drenched island in the middle of the Mediterranean Sea, joining a wave of hedge-fund executives washing up on Malta’s shores, lured by low taxes, cheap labor and a coveted address inside the European Union, Bloomberg Markets magazine reports in its February issue. Read more.

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Asia Hedge Funds Shrink

Asia Hedge Funds Shrink

Number of Asia Hedge Funds Expected to Shrink Further

Asia hedge funds have struggled since the onset of the recession, with hundreds of closures since 2008.  While the number of funds that have closed shop has declined since a record 184 in 2008, the industry has been shrinking and is expected to contract further in 2012.
There were 123 Asian hedge funds that closed in the first 10 months of 2011, compared with 125 in all of 2010 and a record 184 in 2008 when the collapse of Lehman Brothers Holdings Inc. roiled markets, according to Singapore-based data provider Eurekahedge Pte. Artradis Fund Management Pte, once Singapore’s biggest hedge fund, shut, while managers returning money to investors included CoreVest Partners and Kilometre Capital Management Ltd.

Asia’s hedge funds are dwindling as most managers haven’t made money as a business or for investors, said Peter Douglas, principal of Singapore-based GFIA Pte. Hedge funds in the region manage $125 billion, lower than the peak of $176 billion in 2007, according to Eurekahedge.

“2012 will be the year of major attrition,” said Douglas, whose firm advises investors seeking to allocate money to hedge funds and runs a wealth-management business. “People’s stamina will increasingly give out; regardless of your commitment and personal wealth, the number of years that you can go pursuing your dream without any kind of compensation is a stretch.”

Asian hedge funds lost on average 8.7 percent in 2011 through November, their second-worst year on record, according to Eurekahedge. The MSCI Asia Pacific Index declined 17 percent during the same period amid concern that the European sovereign- debt crisis would lead to a global slowdown. Source

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