Numis sees three tiers of listed hedge funds
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Numis Securities has identified a three-tiered market in listed hedge funds, comprising strongly performing single-manager funds at the top, big liquid fund of hedge fund survivors in the middle and small or illiquid funds that are struggling at the bottom.
The research firm says most listed hedge funds failed to protect capital during the volatile markets of May and June but single manager funds such as BlueCrest allblue, BH macro and BH global came out top because market conditions suited their macro-based investment strategies.
These funds are trading close to net asset value, have protected capital and shown little correlation to turbulent equity markets.
Big, liquid fund of hedge funds in the middle tier, including Dexion absolute, have produced reasonable performance this year. Many are trading on wide discounts to NAV because new buyers are more interested in the latest Ucits III funds. Numis says because funds of funds diversify across a range of strategies and sectors, performance will reflect the wider hedge fund universe.
The final group of funds have been blighted by poor performance and are too small or illiquid to attract investors. Some of these are winding down and others face a continuation vote.
Numis Securities associate (investment companies research) Ewan Lovett-Turner says: “The listed space is seeing competition from Ucits III absolute return funds, which remove one level of risk, the discount risk, from closed-ended funds. But there is a question mark about Ucits III funds because the investment restrictions do not allow managers to do everything they can on their flagship hedge funds. It is an area that is waiting to be proven, so there is still a place for the liquid funds of funds.”
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