Hedge funds poised to recoup crisis losses
The hedge fund industry is on the brink of recouping all its investment losses sustained during the credit crunch, placing many funds in a position to start earning performance fees.
By the middle of last week the average fund needed only a 2% gain to reach its value on June 30, 2007, at the height of the last boom, according to Financial News analysis of indices from data provider Hedge Fund Research.
At the current rate, the industry will be back above the highest level of two years ago by late next month. Funds on average have returned 18.3% this year to October 21, helping repair almost all the damage from the relatively controlled losses they made in the second half of 2007, and the more dramatic 19% falls of last year.
Christopher Miller, chief executive of hedge fund rating agency Allenbridge Hedgeinfo, said the industry was now “tantalisingly close” to its pre-crunch levels.
Rickard Lundquist, a portfolio strategist at SEB Private Banking, said: “It seems managers have regained their self-confidence.”
Not all strategies or funds are near their own 2007 level. Equities-focused managers are 9% short, and multi-strategy managers must add 4%. Global macro funds, on the other hand, are 15% above their mid-2007 level after making 4.8% last year amid strong market trends.
And, despite losing 16% this year as shares rose, short-sellers’ gains in 2008 leave them 14% above pre-crunch levels.
Among the funds above their pre-crisis values are Odey European, which has more than doubled its pre-crunch value; Henderson European Absolute Return, which is 26% to the good; and Capula Global Relative Value, which is up 35%, according to investors.
A return to the previous top is vital for managers, because only after hitting the level again – known as the high-water mark – can they earn 20% of fresh profits.
Nicola Meaden, chief executive of hedge fund investor Alpha Strategic, said: “Last year was a dry spell for a lot of funds. Some had put aside cash reserves to survive for a year or two, but if you’re a small fund living without performance fees it’s hard going, especially if you’re a long way under water.”
Henderson, Odey and Capula declined to comment.
del.icio.us
Digg
Newsvine
reddit
StumbleUpon