We spend a lot of timing combing through the hedge fund and institutional media. Quite often we find that the headlines on hedge fund stories are somewhat disconnected from the content of the article. Mainstream journalists we know tell us that it’s not uncommon for headline writers to take creative license in an effort to jazz-up an otherwise pedestrian story. Well, the headline writers were out in force this week. We have read several stories whose headlines either misrepresent the facts in the article, mischaracterize the key players, or miss the point of the story entirely. That’s a shame when the journalists have obviously worked hard crafting their stories.
Trimming hedges: In uncharacteristic fashion, The Economist overstates the challenges facing hedge funds and their role in recent market events in this review of an academic study we covered before Christmas. Says the newspaper, hedge funds’ “…economic power has reduced even more…” recently. But with overall assets down less than global equity indexes on a percentage basis, it’s hard to see how hedge fund “economic power” is any different today it was a few short years ago (even accounting for recent lower leverage levels). At that point, magazines like the Economist warned about the excessive influence of hedge funds. (Also…a 5-point deduction for using the “hedge-trimming” analogy yet again.)
European hedgers bleed assets: Investment News headline writers miss the mark somewhat with this report of how European funds of funds (not “hedgers” themselves) are forecast by Reuters to lose 75% of their assets. While single hedge fund managers will surely be impacted, this is a (debatable) conclusion about the fund of funds model, not about hedge funds themselves.
Bleeding assets, hedge funds register with SEC: Clearly staffed by vampires, Investment News uses more colourful language here. The only problem is that most hedge funds who voluntarily registered did so well before the recent wave of redemptions.
Pension funds expect hedge fund losses: This sounds bad, right? But IPE.com reports that less than a third of pensions surveyed actually reduced their HF investments. One said “The strategic weight increased as the hedge funds performed in absolute terms better – i.e. less negative – than other asset classes so our trustees decided not to take [any] money back from the hedge fund manager but [instead to] increase our weight.”
Public companies keen to invest in hedge funds says survey: Not so. Hedge Funds Review actually reports that public companies “are keen to engage with hedge fund investors, with 89% proactively meeting with hedge funds as part of their investor relations programmes…”. Nowhere does the story address whether companies are keen to invest in hedge funds.
Leadership and Growth
In other news today, Bloomberg reports on Eurekahedge data showing that 80% of Asian hedge funds are underwater right now and likely won’t be charging a performance fee this year. That’s fee deflation for you.
Hedge Fund Research found that the Asian industry shrunk by about 20% last year, but that 2009 may be significantly better. Observed HFR president Kenneth Heinz:
“Despite full year performance losses for 2008, Asian hedge funds posted gains in December and some Asian equity markets have posted strong gains to begin 2009…As investors perceive opportunities and risk tolerance recedes from extreme levels, we expect again to see leadership and growth from the Asian hedge fund industry.”