Monthly Hedge Fund Trends – October 2013 (Deutsche Bank)

October 2013

KEYWORDS: asset allocation, Federal Reserve Board, hedge funds, marketing, AIFMD, European Union, United Kingdom, Switzerland, Chicago, China, qualified domestic limited partners, Hedge Fund Performance, Japan, Hedge Fund Regulation, EMIR, margin, OTC derivatives, non-centrally cleared derivatives, shadow banking, Janet Yellen, CRD IV, CTA, managed futures, Equity markets

Authors:

Deutsche Bank

Organizations:
  • Deutsche Bank

Summary:

Key findings in the report:

- In our first research piece, the team takes a look at Fed Chairman nominee Janet Yellen’s recent policy speeches in order to determine the common themes that illustrate the degree to which Yellen is focused on labor market slack, as well as the particular metrics she is inclined to watch when guiding future monetary policy. In the second piece, the Asset Allocation team discusses the recent factors that have repressed risk appetite, namely QE taper fears, conflict in Syria, and finally the US government shutdown, which have consequently led investors to stockpile cash. The team believes that cash on the sidelines will continue to move to equities, supported by continued bond outflows since Bernanke’s initial taper comments.

 

- The Hedge Fund Capital Group attended the NMS Fall Forum in Washington D.C. where endowments and foundations expressed bullish views on long-only US equity. The team also visited endowments and fund of funds in North Carolina where investors showed interest in emerging managers and ’40 Act products. The team has seen renewed interest for European long/short managers from global investors who are underweight the strategy. In Australia, the team reports that the superannuation industry has reached $1.62 trillion, but that portfolio activity is minimal due to new regulation.

 

- The median fund gained 1.11% in September, overtaking losses in August. Globally, equity strategies led performance last month (median emerging markets equity fund up 2.64% and median equity l/s up 1.90%), followed by the median event driven fund which gained 1.75%. Year-to-date, distressed strategies continue to lead performance (up 10.02% globally), followed by equity l/s (up 9.84% globally). Global dispersion of returns continues to narrow for most individual strategies, though across strategies the dispersion has widened with event driven funds in the 75th percentile posting returns of 4.57% for the month, while CTA/Managed futures in the 25th percentile lost 2.39%.
- The securities lending team highlights the continuing consolidation in the global telecom space, the impact of Blackberry’s recent deal news on short interest and the woes of retailers J.C. Penney and Sears Holdings. In Japan, the Topix and Nikkei both rose after their four month decline and Tokyo’s winning bid for the 2020 Olympics is expected to further boost real estate, construction and tourism sectors in the country.

 

- The Regulatory team gives an update on the reporting obligations guidelines for the Alternative Investment Fund Managers Directive (AIFMD), the UK’s challenge of the rules on pay in the EU Capital Requirements Directive (CRD IV) and European Market Infrastructure Regulation (EMIR). In the US, the Commodity Futures Trading Commission (CFTC) issued a first-step towards rule-making on risk controls and system safeguards for automated trading environments. Also, swap execution facility rules entered into effect in the US.

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