Investors still keen on 'black box' hedgies |
Date: Tuesday, March 16, 2010
Author: Reuters
Investors are
continuing to flock to 'black box' hedge funds and are willing to pay
top-end fees in spite of the poor performance from some big-name funds
recently, according to the head of investment firm AlphaMetrix. Aleks Kins, whose firm gives investors
access to these computer-driven funds whilst affording them greater
visibility and control over assets, said while recent losses from 'black
box' funds had affected investor sentiment, his firm was still seeing
net inflows. His comments come at a
tough time for these portfolios which try to make money from following
trends in global futures markets. Man
Group's (EMG.L)
flagship AHL Diversified Futures fund has lost 17.2 percent over the
past year. The Winton Futures fund lost 4.6 percent in 2009 -- a bumper
year for the wider hedge fund industry -- although it is in positive
territory this year. "Of course it
dampens it a little bit, but the net assets of the industry continue to
grow," Kins said in an interview on Friday. "We've continued to see
positive (net) inflows over the last several years, throughout the
crisis." His firm, which has $2.1
billion (1.4 billion pounds) in assets, saw $70-$100 million net inflows
on March 1, he said. So-called
managed futures funds, or CTAs (commodity trading advisers), were the
top strategy in a tough 2008 for hedge funds, thanks to gains on
equities and oil, but lost 6.6 percent in trendless markets last year
while the wider industry posted gains of nearly 19 percent, according to
Credit Suisse/Tremont. Kins said
some wealthy individuals and funds of funds who made money in 2008 in
CTAs are putting in more money because their initial investments were
too small. "We're seeing some asset
inflow from groups who'd made the right decision in terms of allocation
but the wrong decision in terms of allocation size," he said. He also said that such 'black box' managers
had not had to cut their lucrative charges -- usually a 2 percent
management charge and 20 percent fee -- despite recent losses and the
pressure on the hedge fund industry during the credit crisis. His view backs up the opinions of some top
hedge fund executives who late last year told Reuters the model of 2
percent management fees and 20 percent performance fees would survive
the credit crisis. "The credit
crisis has greatly helped CTAs. They made a lot of money in 2008," said
Kins. "The vast majority (of managers on our platform) are at 2 and 20.
We also see 1 and 20 or zero and 30." AlphaMetrix
gives investors such as pension funds and wealthy individuals access to
hedge fund managers via so-called managed accounts -- portfolios where
the investor still controls the assets, rather than owning units in a
fund, but often pays more for the privilege.