Monthly Hedge Fund Trends – December 2013 (Deutsche Bank)

December 2013

KEYWORDS: asset allocation, Global, Survey, assets under management, European Union, regulatory requirements, CTA, managed futures, commodity trading advisor, long/short equity, distressed debt, Japan, United Kingdom, FCA, Federal Reserve Board, CFTC, Commodity Futures Trading Commission, AIFMD, Cayman Islands, Volcker Rule, cross-border swaps, OTC derivatives, FATCA

Authors:

Deutsche Bank

Organizations:
  • Deutsche Bank

Summary:

Key findings in the report:

-       In our first research piece, the Asset Allocation team highlights $169 billion in pent-up cash and short interest due to taper fears likely making its way to the market over the next 3-4 months despite the 27% rally in equities YTD. The team sees a 10% return on the S&P to start the year assuming $120 billion from pent-up demand goes to US equities on top of normal equity inflows. In our second piece, the Global Economics research team assesses the prospects for US consumer spending in the year ahead. The team foresees increased consumer spending driven by reduced fiscal drag on income growth, further decline in personal saving rates and the reduced pace of mortgage default. More importantly, the recovery of wealth to above historical norms will have an even greater impact on consumer spending and sentiment.

-       The Capital Introduction team compares year-to-date industry growth and investor strategy selection to investor predictions as presented in the 2013 Alternative Investment Survey finding that industry assets have surpassed expectations. Additionally, the team comments on European allocators’ continued focus on fees and on-going regulatory uncertainty. Finally, the team has found that institutional investors and family offices are increasingly setting up shop in Asia.

-       The median fund gained 0.99% in November with the median CTA / Managed futures fund outperforming the median equity l/s fund, up 1.37% and 1.32% respectively. Year-to-date, equity l/s strategies continue to lead (up 13.72% globally), followed closely by distressed which has gained 13.42% globally. This strength of performance for equity strategies is mirrored in each of the regions with European l/s up 13.06%, US l/s up 14.10% and Japan l/s up 22.64%.

-       The Twitter IPO was a hot topic in November, but quickly became overheated while Tesla has suffered negative press lately after several sedans caught fire. Europe experienced an active month for capital raising, particularly convertible issuance. Peugeot and Banca Monte dei Paschi have yet to undertake their capital raising efforts signaling more to come in 2014. Finally, a weaker Yen pushed Japanese markets higher and led to a rise in earnings expectations.

-       In the UK, the focus this month has been on the publication of a dealing commission consultation paper from the FCA and new reporting guidelines on reporting obligations under the Alternative Investment Fund Managers Directive (AIFMD). November saw quite a lot of regulatory activity relevant to hedge funds in the US including Chairman nominations for the Federal Reserve and CFTC, an agreement on FATCA between the Cayman Islands and US, the upcoming vote on Volcker rule, litigation against the CFTC over cross-border swaps rules and finally, clarification on the obligation of US managers to conduct derivatives reporting in Europe.

Related Research and Data