Hedge Fund Focus: June 17, 2016

Ryan FitzGibbon  Follow

In case you missed them, here are the hot topics in the hedge fund/alternatives space this week…

Two big stories opened and ended the week:

  • First, The New York Times wrote an in-depth piece about how, for the first time ever, investors have the upper hand in the manager-investor relationship. Obviously the result of mediocre performance, this shift is providing investors with leverage to negotiate on fees
  • Second, the Financial Times revealed that the 2015 trend of closures outpacing openings (for the first time since the financial crisis) flowed over into this year with shutdowns again outpacing openings in Q1. Uneven performance and high fees were cited as key drivers

 In performance land reports were contradicting this week:

The same issue was also reflected in flow reports. BNY Mellon reported that, despite tepid returns, investors still view hedge funds as a top investment strategy and plan to continue to boost their allocations to the space. On the other hand, Business Insider reported the opposite, finding that 36 percent of investors are fleeing the industry for private equity funds.

However, neither report really matters in light of the revelation that managers are shunning new money due to capacity constraints to keep returns attractive. The move is mostly due to managers wanting to ensure assets under management match strategies. The equity market’s six-year bull cycle, coupled with investors favoring growth strategies over value, are also driving forces.

With quant funds continuing to outperform their human counterparts, investors added an additional $13.7B to the strategies in the first half of 2016, and multistrat managers also experienced good news, delivering gains last month that have helped cut their yearly losses.

In the regulation arena, Visium has been charged with insider trading over allegations it had inside information through a consultant about the Food and Drug Administration’s drug approval process. In light of the charges, Steve Cohen put a moratorium on hiring any of the firm’s employees. Additionally, Platinum Partners is most likely going to wind down all its funds in the wake of last week’s arrest of a former employee on allegations of bribery.

Quick Things: P&I pointed out that while there has been tons of stories and reports on the state of industry, none seem to be saying the same thing; Mercer found that European pension funds’ hedge fund allocations have dipped; SkyBridge cut several of its investments in large profile firms including Dan Loeb’s and John Paulson’s funds; and Brevan Howard is bracing for more redemptions amid stagnant performance and high-profile personnel losses.

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