Global Prime Finance Monthly Hedge Fund Trends (Deutsche Bank)

November 2014



Deutsche Bank

  • Deutsche Bank


Key findings in the report:

— Our Asset Allocation research team discusses how the equity rally was triggered by a covering of short positions but has transitioned over the last week [of October] to being driven by a return of the corporate buyback bids and large inflows. In our second research piece, the Global Economics team evaluates why German Central Bankers do not seem to mind the inflation risks and higher wages in Germany, finding that it is mainly due to the massive under-utilization of productive capacity in the Euro area aggregate with price stability being at risk.

— The Hedge Fund Capital Group discusses recent themes from discussions with investors in Montreal, the southeastern United States and New Zealand. In recent news in Japan, the Government Pension Investment Fund released the results of its annual portfolio review announcing that it will begin allocating to alternatives. In Hong Kong, the team hosted the 9th Annual Deutsche Bank Asian Managers Forum in which the Shanghai-Hong Kong Stock Connect program was a topic of interest.

— Hedge funds attempted to weather the storm of volatility in the month of October but most strategies experienced moderate losses in the wake of the MSCI World Index only gaining 0.57%. Fixed Income, emerging markets equity, and event driven were the lone global strategies to post minimal gains, with 0.90%, 0.12%, and 0.08% respectively for the month. Fixed Income and CTA/Managed Futures strategies posted median gains in the US of 2.12% and 0.98%, respectively, and multi-strat along with fixed income led in Europe with 1.16% and 0.90%, respectively. In Asia, China l/s, pan-asia l/s and macro funds were the only strategies to post gains after slower growth in China could be credited with all other strategies experiencing losses for October.

— The securities lending team highlights the effect of recent volatility in the market, early borrow opportunities in new IPOs, and the steady increase of short selling bans imposed by regulators in October. The team discusses decreasing oil prices which are causing many energy firms to take large hits in the securities lending market. Additionally, the team notes the positive effect of Japan’s Government Pension Investment Fund recent allocation announcement.

— In Europe, ESMA spoke on regulations impacting the asset management sector and covered the revision of rules on inducements under MiFID II (Market in Financial Instruments Directive). Also in Europe, the European Parliament voted in favor of the 27 Commissioner-designates to take leadership over the European Commission (EC) for the next five-year term. In the US, Commodity Futures Trading Commission (CFTC) Chairman Timothy Massad discussed the progress of derivatives reform since the 2008 financial crisis during a gathering of the Managed Funds Association. Commissioner Daniel Gallagher of the SEC recently criticized the Dodd-Frank mandate urging the SEC to engage Congress and work with them to remove counterproductive elements of the initiative.
Deutsche Bank Global Prime Finance Monthly Hedge Fund Trends – November