Thursday, April 18, 2013

6 Ways Hedge Funds Need to Adapt Now

The Sixth Annual Global Survey of Institutional Hedge Fund Investors + Insights from Industry Roundtables

The hedge fund industry is here to stay. Yet, the industry’s value proposition is being seriously questioned, and institutions continue to escalate their demands for transparency and intensify their due-diligence processes.  Some see the institutionalization of hedge funds as a double-edged trend that may hinder performance even as it brings more discipline and accountability to the industry.  No longer can managers simply “show and tell.”  Now investors want proof and need to judge for themselves.

To explore what directions the industry is taking now, and how hedge fund firms can better equip themselves to succeed, SEI & Minard Capital complemented a survey of institutional investors with wide-ranging roundtable discussions. The resulting study identifies several key challenges hedge fund firms must meet if they hope to succeed in the long term:

  • Sustainable edge. Institutional investors are raising the bar for manager selection as “there are too many look-alike strategies in the industry,”
  • Adaptability. Hedge fund managers need to rethink their business models and develop multi-faceted solutions that package their capabilities most effectively.   

  • Clear value added. Investors are increasingly concerned with how much “true alpha” they are getting for the hedge fund fees they pay.
  • The right fit. Today’s investors have complex needs and want hedge funds to serve multiple objectives within an overall portfolio mix. 
  • Scale or sizzle. While large funds still attract the majority of institutional assets, small funds may be better equipped to offer competitive returns.  
  • Business and marketing acumen.  Asset growth often depends more on effective marketing and sound business management than investment performance.

For further details on these challenges, visit SEI’s website to receive your copy of the white paper, “6 Ways Hedge Funds Need to Adapt Now.”

- SEI Knowledge Partnership

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Wednesday, April 10, 2013

Could a Virtual Currency be the Next ETF?

You may have heard a lot about Bitcoin in the past week. For one, the worth of the digital currency has skyrocketed, with values topping $250 today, up from $44 a month ago – and $4.93 a year ago. The staggering run-up has got the InAlternatives team excited – but there’s also talk of a potential bubble in the making, particularly in the wake of a “flash crash” last month that was eventually traced to a technological glitch in the Bitcoin exchange.

Of course, the mishap didn’t temper the appetite for the virtual currency, which is traded on a peer-to-peer network outside the control of central banks. This recent story on Bitcoin reiterates the old adage, the bigger the risk, the more lucrative the reward.

Despite its rock-n-roll beginnings, Bitcoin has claimed a legitimate spot at the table, thanks to global currencies on the verge of a valuation war, according to this story at ETF Trends.

The article poses an interesting question -- could Bitcoin be the backing currency of a ETF?  For now, it is unlikely. That is, until there are securities backed by Bitcoin – and the currency becomes regulated. Bitcoin doesn’t operate like other currencies, because it is in limited supply, making it more akin to a commodity. Bitcoins are also pretty hard to come by, with programmers releasing them at their own discretion.

So, you tell us: Have you ever used Bitcoin? What’s your take on the future of this virtual currency? Could Bitcoing be the backing currency for an ETF or another investment vehicle?

-    The IIR Alternatives team
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Thursday, April 4, 2013

And the hits just keep on coming…

It is clear from all the news these last few weeks that insider trading indictments are not going away. The SEC has clearly targeted any and all who are suspected of doing this dirty deed. And if insider trading indictments aren’t bad enough, it seems now the press is focused on how hedge fund managers are spending their market winnings. 

Just as we all were settling to read about the recent indictments of SAC Capital Advisors LP personnel as well as additional indictments in the Galleon Group case, we got wind of a recent spending spree by SAC founder Steve Cohen. His purchase of a home in the Hamptons and Picasso’s “Le RĂªve”  have made substantial headlines around world. For news junkies, these are the stories that keep on going.

It looks like insider trading indictments are going to remain high up on the SEC’s agenda for the time to come. As such investors and fund managers need to be prepared. Fund litigation and dispute resolution is something on the minds’ of all involved in the hedge fund industry these days.

At GAIM Ops Cayman, there will be sessions devoted to this topic and if you have not registered for this great event you can do so by clicking here . Separately, we are pleased to announce a New York-based Fund Governance and Litigation Summit in September. This new program is geared directly to managers, investors, and lawyers who want to know more about best practices in this area of the hedge fund industry.

In the meantime, settle in, the ride is far from over.

-    The IIR Alternatives team

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