In this Opalesque.TV BACKSTAGE video, Chris discusses:

• The wide range of strategies offered by Australian hedge funds
• The strength of the Australian regulator
• Attractive liquidity terms and general outperformance of Aussie hedge funds
• Who invests into Australian hedge funds?
• High net-worth / self directed superannuation funds: the most attractive investor base for hedge funds

Chris Gosselin has been in the financial markets since 1986, initially in equities broking in Sydney and Melbourne prior to focussing on information distribution. He has been in the hedge fund sector since 2003, and established Australian Fund Monitors in 2006. Australian Fund Monitors provides a range of research services including due diligence, analytics and fund rankings, servicing both local and offshore investors. 

ONE BIG PROBLEM FOR THE HEDGE FUND SECTOR:

THEY'RE AN EASY TARGET

It seems most people's opinions on hedge funds generally fall into one of two categories: Firstly there are those who claim to understand them, and frequently criticise them in the process, and secondly there are those who admit they don't understand them. The problem is those in the second category tend to listen or believe the opinions of those in the first.

And the problem for the hedge fund industry is that as a whole it's an easy target, as the funds that make up the sector is extraordinarily broad and diverse. As a result finding hedge funds or hedge fund managers who fit the negative stereotype is not difficult, in part because they're the ones who get most of the publicity.

I have to admit to potentially being a little biased in the good vs. bad hedge fund debate, and even if I'm not most readers will assume that I am anyway. However it is worth pointing out some facts about the hedge fund sector, while at the same time accepting the reality that not all of them are perfect, and only a minority are truly "best of breed".

So firstly let's look at what makes up the universe. ASIC in its Regulatory Guide 240, is quite clear and correct when it states that there's no firm definition of a hedge fund, but provides a range of features which it uses to identify them. These include a more complex investment strategy that aims to generate returns with a low correlation to equity and bond indices, the use of derivatives such as futures and options, the use of leverage or borrowing, the use of short selling, and finally the charging of a performance based fee in addition to a management fee.

Using the above five criteria when evaluating the performance of hedge funds creates a wide range of funds to choose from, each of which might invest in completely different asset types such as equities, bonds, credit, commodities or currencies which would normally not be associated with each other, and therefore rarely compared.

Adding to the complexity for the casual observer is that there are over twenty different strategies that a fund manager might use. And within each strategy there are further sub strategies or styles to complicate the analysis further. For instance if we just take those funds investing in equities, the www.fundmonitors.com database divides the universe up into eight further sub strategies or styles.

To make matters worse it doesn't end there. Even taking equity long/short, (the most popular equity type strategy) there are funds which specialise in specific market sectors, such are large cap/small cap or industrials vs. resources. Some go further and focus on small cap and emerging resource or gold stocks.

Styles differ also - quantitative and discretionary, as does the geographic universe or mandate which might cover Australia, Asia, Asia ex Japan, Europe or the US - and so it goes on.

The point of detailing all this is that the term "hedge fund" casts a very wide net indeed, and frequently there is little to no comparison or correlation between one end of the spectrum and the other.

The same can be said of performance, and indeed it is worth noting that one of the objectives of hedge or alternative funds for institutional investors is to diversify their exposure to a specific asset class so that when one (such as equities) performs badly others (such as bonds or commodities) provide some protection against the volatility.

Read the entire article by Chris Gosselin here.

ATTACHED FILESOne big problem for the hedge fund sector (pdf format)

Continuing our highly successful "Meet the Manager" presentation series, Jack Lowenstein, Managing Director, Joint Chief Investment Officer, Morphic Asset Management will present an overview of the Morphic Global Opportunity Fund on Thursday 16th May 2013, which he describes as being, "Global with a long equity bias and a macro overlay".

Morphic's philosophy is summarised by the view that only funds with flexible hedging strategies will be able to deliver acceptable, steady, real, absolute returns for investors over the investment cycle. The latest copy of our Research Review of the Fund is here.

Jack will share his views on the outlook for the global economy and markets. He recently returned from Japan and will give us some insights into the changes in markets and sentiment since Prime Minister Abe's election.

Thursday 16th May 2013 at 12:30pm

Sydney city venue to be advised

RSVP by Monday 13th May 2013

If you are interested in attending this "Meet the Manager briefing", please reserve your seat and we will send you confirmation of your registration by return email.

ATTACHED FILESMorphic Fund Review March 2013 (pdf format)

In 2012, AFM hosted a series of lunch presentations  entitled "Understanding Hedge Funds" which provided investors with a more balanced view on the sector than is sometimes portrayed in the media.  Following feedback from a number of our guests we also organised briefings and presentations for a small group of investors to "meet the manager" and hear from individual fund managers in person.

Our "Meet the Manager" briefings will be held every month, over breakfast or lunch and will showcase AFM's Fund Manager clients, their available Funds and views of the current market and opportunities ahead.  

If you are interested in attending any of AFM's "Meet the Manager" briefings, please reply by email.

Fund Managers wishing to participate in the presentation series are invited to contact Chris Gosselin, CEO, to discuss the opportunity.

SEI's sixth annual survey of institutional hedge fund investors was conducted in November 2012 by the SEI Knowledge Partnership. Online questionnaires were completed by senior investment professionals at 107 institutions. 

Endowments and foundations account for 19% of all survey respondents. Pension plans account for another 18% of respondents, with public plans dominating. Family offices account for 9% of responses. Funds of hedge funds (FoHF) accounted for one-third of all responses. FoHF data was tabulated separately from other institutional investor responses. Remaining responses came from banks, insurance companies, and non-profit organisations.

To read the full report, please click here.

ATTACHED FILES6 Ways Hedge Funds need to Adapt now (pdf format)

Last year we hosted a series of lunch presentations  entitled "Understanding Hedge Funds" which provided investors with a more balanced view on the sector than is sometimes portrayed in the media.  Following feedback from a number of our guests we also organised briefings and presentations for a small group of investors to "meet the manager" and hear from individual fund managers in person.

Our next "Meet the Manager" briefing is with Monik Kotecha from Insync Funds Management on Wednesday 10 April 2013.  

Monik's fund, the Insync Global Titans Fund, invests in a concentrated portfolio of large cap global stocks with a focus on those companies that can consistently grow dividends and earn high returns on invested capital. The latest copy of our Research Review of the Fund is here.

Monik will share his views of the market and the opportunities and risks which lie ahead. Having just returned from the UK and meeting many leading multinational companies he will also be able to provide an update on the global trends and observations they provided.

If you are interested in attending this Meet the Manager briefing, please reply by email and we will send you confirmation of your registration and inform you of the Sydney city venue.

Wednesday 10 April 2013 at midday

Sydney city venue to be advised

RSVP by Thursday 4 April 2013

ATTACHED FILESAFM Fund Review (pdf format)

One of the UK's fastest-growing hedge funds is slashing its fees, in a move that it hopes will spark a rethink of the industry's notoriously high charges.

The new Core Macro fund being set up by Cambridge-based Cantab Capital will employ similar trading strategies as funds from Man Group, Winton Capital and BlueCrest, three of the world's biggest hedge funds that manage $100bn between them, but at half the cost to investors.

Australian Fund Monitors (AFM) www.fundmonitors.com provides the most comprehensive source of data and information on Absolute Return, Hedge Funds and Alternative Investments in Australia.

Performance and Industry News will be updated weekly.  We are also releasing a series of videos on Understanding Hedge Funds, with Fund Manager interviews to be added to the video showcase in 2013.  Please watch the first video, which explains what a Hedge Fund actually is, by clicking here.

You can navigate through the site by either the Menu Bar in the header, or by using the icons at the top of each page.

Register for Weekly Newsletter

Registration to the AFM website is FREE and will provide access to general industry information and performance data and also to preview the comprehensive range of information provided by Australian Fund Monitors on Absolute Return, Hedge Funds and Alternative Investments in Australia.

AFM provides basic factual and performance information on each Fund, with the description of each Manager and their Funds' Strategy provided by the fund manager, or documentation provided by the fund manager. At the time of listing each Manager is requested to confirm their information and that they hold an appropriate and current Australian Financial Services Licence for any fund listed.

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More detailed information on individual Managers and Funds, with historical results, key performance indicators, and the ability to save funds to a Watch List is restricted to Subscribers only. Please register prior to subscribing.

Enjoy your Summer holidays!

We would like to take this opportunity to wish all our visitors and clients a very merry Christmas and safe and happy holiday season.  We look forward to a prosperous 2013!

SINGAPORE: Hedge fund managers said industry consolidation and increased regulatory oversight with accompanying costs are the top two challenges facing the industry in the next one to two years.

This is according to a pool of 100 hedge fund managers interviewed by accounting firm, Ernst and Young.

Read the entire article here. www.channelnewsasia.com

AFM's E5 Model Equity Portfolio, which tracks the performance of 5 equally weighted funds investing in Australian equities, returned 2.81% in December to bring 12 month performance to 9.78% and an annualised performance since inception of 15.26% with volatility of just 5.69%.

December's results were positive from all underlying funds, with returns ranging from +0.77% through to +6.84% from Herschel's Absolute Return Fund, to take their annualised performance since inception in May 2006 to +16.75%.

To view the Portfolio's performance details, click here