Singapore Hedge Fund

Alternative asset management in Singapore

Asian hedge funds fall 0.4 pct in August but up 13.1 pct in 2009

Asia-focused hedge funds fell 0.4 percent in August after five straight months of gains, pulled down by sharp declines in China, Hong Kong and Taiwan shares, hedge-fund tracker Eurekahedge said.

Japan hedge funds edged up 0.7 percent, North American funds rose 1.8 percent, Latin American funds gained 2.1 percent and European funds returned 2.6 percent, the Singapore-based firm said in a statement received on Wednesday.

Asian hedge funds have gained 13.1 percent since the start of the year, after a 20.3 percent drop in 2008, according to Eurekahedge, which said its estimates are based on preliminary data.

Eurekahedge also said in its statement that hedge funds globally attracted net inflows of $4.5 billion in August, with over 50 percent of funds tracked by the firm reporting new inflows from investors.

Globally, all hedge fund investment strategies showed positive returns in August, led by funds investing in distressed debt which returned 6.23 percent average, Eurekahedge said. The weakest performers were commodities trading advisers and managed futures funds, which returned 0.5 percent.

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Fullerton aims to extend Singapore’s reach by wooing the European investor

The city state of Singapore punches well above its weight in the world of investment. Between them Temasek Holdings and the Government of Singapore Investment Corporation, the tiny nation’s twin sovereign wealth funds, manage an estimated $400bn (£245bn, €280bn) of assets.

But Singapore is not resting on its laurels; it is about to wade into the congested European asset management industry as part of a plan to raise its assets under management higher still.

Fullerton Fund Management, the funds offshoot of Temasek, currently manages just $2.3bn of external money, in addition to the assets of its parent.

But Fullerton hopes to bolster this tally by launching its first European Ucits funds via the migration of two existing vehicles from the Cayman Islands to Luxembourg before the end of the year.

Gerald Lee, chief executive and founder of Fullerton, believes the move is essential to crack the European market, which currently accounts for just 5 per cent of its customer base.

“We have funds registered in Singapore as well as in the Cayman Islands but there’s just no way we can penetrate the [European] market, if the fund structure is not right. We realise that if we don’t put funds on a Ucits platform we can be marketing here every day, but we won’t get a single cent.”

Fullerton’s initial offerings will reflect its expertise in Asian securities, but with an interesting twist. One fund, Fullerton Asian Equities, is a straightforward relative return product. But the other, Fullerton Absolute Return Asian Equities, is a market timing vehicle which allows the manager significant freedom to switch between equities and cash in anticipation of market rallies and slumps.

Mr Lee is adamant that his managers are able to time the markets in this manner, in spite of the fact that many of the world’s most successful equity managers say such timing abilities are beyond them.

“The whole idea is to take away enslavement to the index. We discover that the moment you do that, actually equity managers do have a very great sense of market timing, contrary to popular belief,” says Mr Lee, who was head of fixed income sales at SBC Warburg Singapore and deputy chief investment officer at Deutsche Asset Management Singapore prior to joining Temasek in 1999.

“I come from a fixed income background, I spent my years in a business as a fixed income manager, so I always found it very perplexing that equity managers claim that they don’t know how to time the market.

“Here I was trading bonds and managing bond portfolios knowing that, actually, it’s not a very difficult call. You don’t need to be somebody with high IQ, you just need to have a very good sense of what is happening.

“You always know when the market is overbought and you know when the market is oversold. Equity managers are capable of market timing and we want to put that to good use.”

Even armed with this information, picking turning points is notoriously hard. During the latter stages of the 1990s bull market, many managers were all too aware that a host of technology, media and telecoms stocks were wildly overvalued, but those managers brave enough to exit these sectors suffered as the TMT bubble continued to inflate, and in many cases lost their jobs as a result.

Mr Lee is aware of the difficulties, but believes the answer is to mandate absolute return managers to beat deposit rates by 5 to 7 percentage points a year over the cycle.

They are likely to exceed this in a bull market, even if they have not participated fully in the rally, giving them the freedom to bail out without being fearful as to their future employment prospects.

“The absolute return guy actually knows how to take money away from the table when things are overheated,” argues Mr Lee. “Where he really adds value is when the market starts falling apart and he has everything very nicely in cash.”

According to Mr Lee, Fullerton first trialled market timing with some of its equity managers five years ago, and the experience has been “very pleasant”.

However, the experience of the Fullerton Absolute Return Asian Equities fund since launch in 2007 has been somewhat less pleasant. During 2008 it lost 37 per cent, against a 52 per cent drop in its underlying Asia ex-Japan index.

Mr Lee largely blames investors for this state of affairs arguing that, with the fund launched during a bull market, investors were unwilling to accept Fullerton’s recommendation that the “neutral” equity weighting should have been 30-50 per cent and instead insisted neutral should be 70 per cent.

“They wanted to have their cake and eat it,” he says.

Fullerton also has plans to go after US investors, but these are unlikely to be firmed up until next year at the earliest, when it is able to start learning some of the lessons from its European push.

In spite of the imminent migration of two of Fullerton’s vehicles from the Caymans, Mr Lee is reluctant to sound the death knell for the Caribbean offshore financial centre, which some see as a potential loser from moves by the US and Europe to stem tax avoidance and tighten regulation of the financial system.

“There is a critical mass of excellence in the Caymans, in terms of people knowing the legal and administrative aspect, so I think they continue to have the advantage,” he says.

Yet, following budget changes in February which improved the tax treatment of funds in Fullerton’s home market, Mr Lee adds: “I can see that more and more hedge funds domiciled in Singapore may not find it necessary to incorporate their funds in Cayman as before.”

Further change may be afoot for Fullerton, however. Last month, Temasek said it would be prepared to list some of its biggest holdings, such as port operator PSA and Singapore Power, adding that even Fullerton itself could be suited to a float.

http://www.ft.com/cms/s/0/42d49b3c-9979-11de-ab8c-00144feabdc0.html?nclick_check=1

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Boris tries to save london's first place!

Boris Johnson

Boris Johnson

Mr Johnson was there to argue against “enormously damaging” plans to tighten regulation, saying that it would drive jobs in the capital elsewhere and cost the UK billions in tax revenues as business relocated to other financial centres such as New York and Singapore.

“After a series of meetings I am confident we have successfully made a concrete and sensible argument,” the Mayor said. “Amongst the British MEPs I met, there was widespread recognition of the potentially damaging effect that the directive, in its current form, will have on London, the UK and Europe. I was encouraged by MEPs to continue to lobby for the modification of the directive.”

Mr Johnson said that he had a “very friendly, warm and constructive” meeting with Charlie McCreevy, the EU Commissioner responsible for the regulation of financial services.

“Commissioner McCreevy realises the importance of the capital’s financial services industry to London, as well as Europe, and recognises that the directive will be, and should be, amended as it makes its journey through the European Parliament. He encouraged us to continue to play our part in this process and I fully intend to do so,” the Mayor added.

He has maintained throughout that the draft directive is unduly harsh on hedge funds and private equity, which he says were not to blame for the financial crisis. He said he is in favour of “proportionate regulation” but argued in its current form it would cut off a vital supply of investment funding from an industry which currently employs 7,000 people directly in private equity in London and a further 35,000 directly and indirectly within hedge fund management. About 80pc of European hedge funds and 60pc of European private equity funds are located in London, according to the Mayor.

The Alternative Investment Fund Management draft directive was published by the European Commission in April. Mr Johnson has dismissed the plans as protectionist and anti-competitive, and claimed they display ignorance about the workings of the industry.

He has argued that the correct thing to do would be to regulate at the global level through the G20.

JVB with the telegraph

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London Mayor: Hedge Fund might leave London for Singapore

We are Migrating the blog here: http://singaporehedgefund.com – faster, better,bigger…….

I know, it sounds like a tabloid headline but basicaly not too far from the truth 🙂

Mayor warns EU not to strangle world’s premier financial centre

The Mayor of London, Boris Johnson, today called on the Government to help him resist the EU Commission’s dangerous plans to regulate financial services. He fears that the plans could threaten London’s status as the global capital of financial services, and will result in European investors losing out and seriously damage the capital’s financial services industry. The Mayor fired off his warning directly to Lord Mandelson as he addressed a major economic conference in London, attended by both the Business Secretary and Shadow Chancellor, George Osborne.

Boris Johnson told delegates that he is so concerned he has sought an urgent meeting to personally lobby EU Commissioners and make the case for London. He singled out the EU draft directive on Alternative Investment Fund Management as a measure that would seriously weaken the European marketplace for hedge funds, private equity and venture capital. It will substantially reduce the choices available for investors, put up protectionist barriers around Europe, and give a huge competitive boost to financial centres outside the EU, such as New York, Singapore, Hong Kong, and Geneva – to Europe and London’s ultimate disadvantage.

In London alone, the private equity and venture capital industry directly employs around 7,000 people and it is estimated a further 35,000 people are employed directly and indirectly by hedge fund managers.  The industries are overwhelmingly based in the capital, with 80 per cent of European hedge funds and 60 per cent of European private equity funds located here. Sources close to the hedge fund industry estimate that their tax contribution alone is around £3 billion per annum. More importantly, many commentators, including EU Commission’s influential report by Jacque de Larosiere, have agreed that the hedge fund industry combined with other alternative funds do not pose a material systemic risk to the financial system as a whole.

The Mayor said: “I support strong and sensible regulation of financial services to prevent a recurrence of the financial crisis that everyone in Europe is now suffering. However, in my book this means regulating at the right level. As financial services are a global business, this must be set at a global level by the G20.

“My greatest worry is that this is just the start of a flood of draft directives that will start to filter out of Brussels. London is the home of hedge funds and private equity, but having a strong hedge fund and private equity industry is not just good for London, it is good for Europe. No other European city’s financial services sector is competing on the same international level as London, and the EU Commission must recognise this. That is why I’ve decided to personally take the lead on this and lobby key figures. London’s main competitors are outside the EU, including New York and Hong Kong, so it’s blatantly obvious that this unilateralist approach will damage our competitiveness.”

The Mayor is keen to ensure that any European regulation of the financial services industry appreciates that London is competing with international cities such as New York, Geneva, Hong Kong and Singapore. As a result the Mayor is calling for more effective international regulation that works across all of the capital’s competitors and for draft EU legislation to assist, not cut across, those efforts. He is encouraging the government to engage much more swiftly before these directives are issued so that the regulation is right for Europe, the UK and London.

The Mayor’s comments were part of a speech on his proposals for London’s economic development, set out in Rising to the Challenge, published in May. The conference, organised by the London Development Agency, is bringing together over 300 leading politicians, business people, commentators and policy makers to discuss and debate the key issues facing London’s economy and to help develop solutions to shape the future of our capital.

In his speech, he called for London to promote more powerfully its position as the world’s undisputed capital of business and ensure that central government work with the city to help keep the capital highly competitive in future. He committed to maintain London as a world-leading low carbon capital, undertake initiatives to improve Londoners’ skills and employability and to continue to invest in projects for London’s long-term economic growth.

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Don’t Blame Hedge Funds!

A really good article from the New York Time… I thought you might find it interesting:

By MELVYN KRAUSS
Published: June 24, 2009

When President Obama unveiled his financial regulation plan last week, a collective sigh of relief was heard throughout the U.S. financial community. The “regulation overkill” many feared on Wall Street had not materialized.

So bravo to Mr. Obama, who has demonstrated the good sense not to kill the goose that laid all those golden eggs.

Will Europe’s politicians be smart enough to follow his lead? The jury is out. But there is reason to believe “regulation overkill” may be on the menu for Europe.

Consider the case of hedge funds. They have become a favorite target for European politicians because they are largely not regulated, use considerable leverage and created a new class of wealthy youngish people who are widely envied and resented.

But the big lie about hedge funds is that they are one of the causes of the financial crisis. Speaking of hedge funds last week at a conference in Milan, the European Central Bank executive board member Lorenzo Bini-Smaghi asserted that “whoever was not regulated before does not want to be regulated and talks of over-regulation, but the fact they weren’t regulated was one of the causes of the crisis.”

This is nonsense. The Federal Reserve, not hedge funds, created the housing bubble that blew up in our faces. Banks, not hedge funds, made dubious loans to people who couldn’t afford the houses they were buying. Bankers, not hedge funds, bundled these “toxic assets” and sold them to other financial institutions. A.I.G. is an insurance company, not a hedge fund.

There is not one serious economist in the United States who believes that hedge funds were one of the causes of the crisis — even though many believe there needs to be more regulation of hedge funds because of their size and alleged potential for systemic risk.

The Obama plan takes a moderate approach to the issue. It compels hedge funds to register with the Securities and Exchange Commission and provide some administrative data. This imposes a compliance burden on the funds but nothing they can’t live with.

While hedge funds are little more than a side show in the United States, in Europe they have become a hot button issue. The leader of a campaign for E.U. regulations of hedge funds, the socialist member of the European Parliament Poul Nyrup Rasmussen, pounds the table in a media interview and taunts hedge fund managers with the statement, “What are you afraid of?”

But it’s not what the hedge funds should be afraid of that’s the issue; it’s what the European Union should fear if it goes through with tough measures against alternative investments. Over-regulation will cause the better European-based hedge funds to flee the E.U. for less hostile regulatory environments, even though they will continue to trade on the European exchanges.

This means the European regulatory authorities will have even less knowledge than they do now of the trading activities going on inside their borders. What would they gain by this?

Of course, the big losers will be European investors who would be restricted to investing their capital with E.U.-based firms — European pension funds and pension fund beneficiaries. They will suffer unwanted declines in their rates of return.

Ironically, the hedge funds themselves would merely be inconvenienced by over-regulation. When European investors are forced to pull out, the better hedge funds easily will replace their money with that of the sovereign wealth funds from places like China and Singapore. Instead of a hedge fund operator living in London managing money for a German pension fund, the trader will be living in Zurich and managing money for the Singapore government.

In the investment world, the ultimate scarce resource is trading talent, which is internationally mobile. President Obama understood this, which is why he chose a moderate course in regulating hedge funds.

Protectionism is another factor lying behind some of the attacks on hedge funds. Europe’s hedge fund industry is located primarily in London. France’s president, Nicolas Sarkozy, wants to change this by using strict E.U. regulations to force Britain to “harmonize” itself out of business. He wants part of the hedge fund action for France.

For protectionists, the war against hedge funds is a thinly disguised war against London’s influence. Why should other Europeans — particularly, the British — cooperate with him?

Melvyn Krauss is a senior fellow at the Hoover Institution, a think tank at Stanford University.

Jean Viry-Babel
senior partner
VBK partners

Filed under: hedge fund, , , , ,

Don't Blame Hedge Funds!

A really good article from the New York Time… I thought you might find it interesting:

By MELVYN KRAUSS
Published: June 24, 2009

When President Obama unveiled his financial regulation plan last week, a collective sigh of relief was heard throughout the U.S. financial community. The “regulation overkill” many feared on Wall Street had not materialized.

So bravo to Mr. Obama, who has demonstrated the good sense not to kill the goose that laid all those golden eggs.

Will Europe’s politicians be smart enough to follow his lead? The jury is out. But there is reason to believe “regulation overkill” may be on the menu for Europe.

Consider the case of hedge funds. They have become a favorite target for European politicians because they are largely not regulated, use considerable leverage and created a new class of wealthy youngish people who are widely envied and resented.

But the big lie about hedge funds is that they are one of the causes of the financial crisis. Speaking of hedge funds last week at a conference in Milan, the European Central Bank executive board member Lorenzo Bini-Smaghi asserted that “whoever was not regulated before does not want to be regulated and talks of over-regulation, but the fact they weren’t regulated was one of the causes of the crisis.”

This is nonsense. The Federal Reserve, not hedge funds, created the housing bubble that blew up in our faces. Banks, not hedge funds, made dubious loans to people who couldn’t afford the houses they were buying. Bankers, not hedge funds, bundled these “toxic assets” and sold them to other financial institutions. A.I.G. is an insurance company, not a hedge fund.

There is not one serious economist in the United States who believes that hedge funds were one of the causes of the crisis — even though many believe there needs to be more regulation of hedge funds because of their size and alleged potential for systemic risk.

The Obama plan takes a moderate approach to the issue. It compels hedge funds to register with the Securities and Exchange Commission and provide some administrative data. This imposes a compliance burden on the funds but nothing they can’t live with.

While hedge funds are little more than a side show in the United States, in Europe they have become a hot button issue. The leader of a campaign for E.U. regulations of hedge funds, the socialist member of the European Parliament Poul Nyrup Rasmussen, pounds the table in a media interview and taunts hedge fund managers with the statement, “What are you afraid of?”

But it’s not what the hedge funds should be afraid of that’s the issue; it’s what the European Union should fear if it goes through with tough measures against alternative investments. Over-regulation will cause the better European-based hedge funds to flee the E.U. for less hostile regulatory environments, even though they will continue to trade on the European exchanges.

This means the European regulatory authorities will have even less knowledge than they do now of the trading activities going on inside their borders. What would they gain by this?

Of course, the big losers will be European investors who would be restricted to investing their capital with E.U.-based firms — European pension funds and pension fund beneficiaries. They will suffer unwanted declines in their rates of return.

Ironically, the hedge funds themselves would merely be inconvenienced by over-regulation. When European investors are forced to pull out, the better hedge funds easily will replace their money with that of the sovereign wealth funds from places like China and Singapore. Instead of a hedge fund operator living in London managing money for a German pension fund, the trader will be living in Zurich and managing money for the Singapore government.

In the investment world, the ultimate scarce resource is trading talent, which is internationally mobile. President Obama understood this, which is why he chose a moderate course in regulating hedge funds.

Protectionism is another factor lying behind some of the attacks on hedge funds. Europe’s hedge fund industry is located primarily in London. France’s president, Nicolas Sarkozy, wants to change this by using strict E.U. regulations to force Britain to “harmonize” itself out of business. He wants part of the hedge fund action for France.

For protectionists, the war against hedge funds is a thinly disguised war against London’s influence. Why should other Europeans — particularly, the British — cooperate with him?

Melvyn Krauss is a senior fellow at the Hoover Institution, a think tank at Stanford University.

Jean Viry-Babel
senior partner
VBK partners

Filed under: hedge fund, , , , ,