Monthly Hedge Fund Trends: Passion to Perform (Deutsche Bank)

October 2014



Deutsche Bank

  • Deutsche Bank


Key findings in the report:

— Our Asset Allocation research team discusses the indicators that point to extreme protection buying in equities. Net short positions in Russell 2000 futures are now at three year highs and small cap funds have seen outflows of 6% of AUM since March 2014; bond futures positions, however, are slightly long in aggregate. In our second research piece, the US Economics team evaluates the September payroll data, which was stronger than expected leading to the team’s upward revision in second half 2014 GDP forecast. Our final research piece, from the Global Economic Perspectives team, looks at food security in China finding that the nation is now a net food importer which gives China a key stake in the global trading system beyond its desire to export manufactured goods.

— Last month, the Capital Introductions team spoke with the institutional investor community regarding their commitment to remain allocated to hedge funds, finding that the recent announcement from CalPERS has no bearing on most investors’ commitment to the industry. This message was reinforced through meetings with Canadian pensions and global insurance companies throughout the month. A recent trip to Munich indicated that local investors remain committed to their hedge fund portfolios as well, with several allocators increasing their hedge fund exposure slightly.

— Hedge funds proved their ability to protect capital in September as the median global fund gained 0.10% despite the MSCI World Index losing 2.78%. CTA/Managed Futures continue to lead performance globally, with the median fund posting gains of 2.49% for the month and 4.83% for the year. CTA/Managed Futures and macro strategies posted median gains in the US of 2.42% and 1.88%, respectively, and also led in Europe, up 2.28% and 1.10%, respectively. These two strategies also posted the highest dispersion of returns. In Asia, Japan l/s, multi-strategy and macro funds gained despite the MSCI Asia Pacific incl. Japan Index declining 5.14%.

— The securities lending team notes the highest quarterly M&A deal volume of 2014 and the return of the convertible bond market (with nine new issues for the month) as the highlights for September. Sectors gaining short interest over the month of September included offshore drilling in the US and real estate in Asia.

— In Europe, ESMA issued a consultation paper on rules to upgrade the depositary function under UCITS V and nominations for the EU Commission were released and set to be formally voted on in mid-October. In the US, the CFTC proposed rules on marging for non cleared swaps and is seeking comments on how to apply its draft rules to cross-border transactions. At the Senate Banking Committee, a hearing was held on Dodd-Frank implementation in which the SEC’s Chair White indicated that by the end of the year, the SEC would finalize rules on derivatives, executive compensation and risk retention rules for origination of securitizations.
Deutsche Bank Global Prime Finance Monthly Hedge Fund Trends – October 2014