Strategies products development priorities

The world of "hedge funds" continues his metamorphosis. Strategies, products, development priorities... There are few managers to make the economy of a discount flat of their organization. As many important issues for an industry still struggling to find its levels of assets and collection rate of prior to the crisis. Not to mention to regain the confidence of customers, severely damaged.

They were about 4,000 in 2007. Not in were more than 2,500 in the first quarter of 2009. The balloon of the "hedge funds", which had seen their number multiplied by 5 between 1994 and 2007, erupted violently through the crisis of the "sub-prime". The bankruptcy of Lehman Brothers, one of the main brokers ("premium broker") of hedge funds in September 2008 has accelerated their fall. Thus, "hedge funds" that used the American Bank as "premium broker" had two times more chance of default that funds who were resorting to other brokers. To assess the failure of the funds rate, the researchers calculate variations in the number of "hedge funds" that communicate their yields to the databases (TASS, CISDM...). In normal times, a "hedge fund" can stop to deliver performance for reasons other than of underperformance: he may have enough collected and wishes to out investors 'radar", it can change database... Financial crises are however the closures and winding-up of funds that represent and explain the majority of "disappearances": the rate jumped from 31.4 in 2008, against an average of 12.2 between 1994 and March 2009 (1). He had already begun to rise in 2007 where he had reached 16.4, a level higher than the previous peak registered at the Russian crisis of 1998, which saw the LTCM Fund sinking with loss and crashing. Managers who have survived more that others in the last financial tornado belonged to a "hedge funds" more experienced and older. A reversal of the historical relationship to that, until 2007, they are the youth funds and small size which recorded higher than "hedge funds" performance of large and old.

For their part, funds of hedge funds which have less closed that others were larger than average, and less volatile performance. Normally, they have a liquidation rate much lower than that of the funds in which they invest without surprise: it is 7.3 for their long-term average (1994-2009). Sign of the violence of the crisis, he however jumped 27.5 in 2008 for the multi-gérants, and in particular those who had invested with Bernard Madoff (read below)

To traditional management

Man Group, Brevan Howard, GLG Partners or Odey were among the many "hedge funds" to launch the alternative products bound for individuals. These were particularly long/short funds (buy and sell securities short). Have a more stable customer base have appear them as one of the benefits of this foray into the world of traditional management while responding to the request of protection and coverage of the crisis. A risk is that "hedge funds" under format Ucits (Fund coordinated European) recorded a decrease in their yields and see their problem because of the constraints of the coordinated funding strategies, according to a survey of the Edhec sponsored by Caceis. More rare were the "hedge funds" which completely turned into traditional societies. Exception: after six years of existence, Cantillon Capital Management decided in June 2009 to turn its back on its alternate past to become a classical Manager, but maintaining in part the mode of compensation much more attractive and "hedge funds"... Its founding Manager, William Von Mueffling was aware of the general public when in his previous House, Lazard, he had fully anticipated the collapse of the dot-com bubble in short selling technology stocks. "Despite its expertise in selling, this handler is never really savvy in the mould of the Manager of"hedge fund"typical." It has consistently adhered to a philosophy of "stock-picker" (values coach) fundamental, says Arjuna Sittampalam, associate researcher at the Edhec Risk Institute. "His change of direction is also indicative of the"unspeakable Secret"industry alternative, namely that it finally likes not much resort to selling, and prefers to be"buyer". Restrictions on selling by regulators in the wake of the crisis may in part explain the abandonment of the practice, already quite difficult to implement for earning money.

Forget Madoff

Bernard Madoff turned everything he touched into gold. What do American financier a sort of "Faust of management". Awakening was that hard for clients, and harm to "hedge funds", which he does yet not claiming was considerable. At the time, would it have been possible, using only public and known data, suspect that the strategy implementation by Bernard Madoff was not that he claimed to be Yes categorically says a study (1) which has reviewed and analyzed a series of iconic Fund () who had invested in the New York financier. These funds, so-called "market neutral", were generally presented as products whose performance was independent of the direction (increase or decrease) of markets. However, their yields were higher than those of a representative portfolio of indices of the strategy "market neutral". They were always positive in the months where these indices were oriented down. Thus, between 2005 and September 2008, the average annual yield of 5 funds that had invested in Madoff was understood between 7.8 and 9, for a yield of 5.8 for the index portfolio. A great feat, stunning as some of the funds were in addition a lower volatility... To explain these differences, Bernard Madoff was in before his famous so-called "Split-strike conversion." What impress the neophytes. This strategy, based on purchase of sale and assignment of options to purchase options, is however well known options traders and professional markets. In addition, academic, public, fed research has studied and reviewed this strategy more than a decade. The researchers compared the performance of three of the Madoff (Fairfield, Kingate, Optimal) Fund with that of the Gateway Fund, which implements this strategy based on options, as well as with passive replication of this strategy. Here again, the Madoff Fund had very different and resolutely flattering behaviour in comparison. Thus, their average annual performance was at least two times greater than that of the Gateway Fund with a much lower volatility (report of 1 to 3).