View more on these topics

Listed Fohfs face battle for survival

Numis Securities believes the listed multi-strategy fund of hedge funds sector is under pressure to survive following another year of disappointing returns in 2011.

The research firm had expec-ted a core of the bigger listed fund of hedge funds to survive the market turmoil but it now believes the whole sector may be under threat. It points out that more funds threw in the towel last year to go through managed wind-downs while others returned capital to shareholders through tender offers, redemptions and share buybacks.

Many of the listed hedge funds face continuation votes early this year, triggered by their discount exceeding 5 per cent over the previous year. Numis says these votes will be catalysts for corporate action, which could bring further investment opportunities for investors.

Numis says listed funds of hedge funds have been unable to attract new money due to lacklustre performance and competition from Ucits funds as a way for investors to gain exposure to mainstream long/short equity strategies. The firm says the only significant buyers have been value investors who have applied pressure on funds to return capital, a strategy that has been profitable for investors who bought at a discount.

Numis points out that this strategy can be time-consuming for funds with less liquid portfolios.

Head of investment companies research Charles Cade says: “We believe there are opportunities to exploit value in the lis-ted fund of hedge funds sector. However, buying a fund for potential wind-up is complicated by the illiquid nature of underlying portfolios, and may require holding illiquid and potentially unlisted assets over an extended realisation period.

“As a result, we favour large liquid funds of hedge funds which can return capital while retaining meaningful trading liquidity.”

Recommended

13

IFAs face two-pronged attack over Keydata

IFAs that advised clients to invest in Keydata products are under unprecedented attack by a combination of the FSA and the Financial Services Compensation Scheme. The FSA is visiting selected IFAs that sold Keydata products to examine the due diligence performed by the IFAs, the risk warnings given to clients and whether the products matched […]

1

Quilter bought by private equity firm Bridgepoint

Wealth manager Quilter is to be sold to private equity company Bridgepoint, according to owner Morgan Stanley Smith Barney. The company has been sold to Bridgepoint “in partnership” with the Quilter management team, but the terms of the deal have not been disclosed. The sale is expected to complete in the first quarter of 2012. […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Leave a comment