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 BEST PERFORMING STRATEGIES |
December 2009 Commentary
What a difference a year makes! A year ago we were in the middle of the worst financial crisis in history. Through November 30, 2008 world equity markets were down 45% while S&P was down 38%. The VIX index, which can be considered a measure of risk aversion, rose to unprecedented levels reaching closing at 55.84 at the end of November after reaching an all time high of 80.6 on October 27, 2008.
In contrast, 2009 has been a very positive year. As of November 30, 2009 MSCI World Index was up 20.54% while S&P 500 was up 21.3% and VIX has declined to 23.87. Another sharp difference between 2008 and 2009 could have been observed in both relative and absolute performance of hedge fund strategies. In 2008 hedge funds posted their worst year ever with Barclay Hedge Fund Index losing 21.92% through November 30, 2008 and 21.63% through December 2008.
The best performing strategy of 2008 was... |
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| FUND OF THE MONTH |
Fund of the Month Section
By Aleksey Matiychenko | Risk-AI, LLC
We continue our Fund of The Month Section. In this section we identify funds that have
interesting risk/return profiles. The following section is neither an advertising of the
funds nor investment recommendation. At the time of writing Risk-AI, LLC has no
relationship with the fund described. The following is presented for academic purposes
only.
Since in our main column we wrote about market regime analysis, we thought it would be
appropriate to select a fund based on its performance in different regimes. For this
exercise we identified an Equity Long/Short Fund called Futuris Fund for our analysis.
Over a ten year track record the fund posted an impressive return of 20% with annualized
volatility of 14%. The fund’s return distribution exhibits some fat tails on the positive
side as suggested by positive skew of 2.69....
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| MACRO ENVIRONMENT |
Monetary Policy - Part II
By Ron Laurent | Veritas Partners LLC
We expect the Fed to maintain its ultra-accommodative monetary policy indefinitely, in an attempt to support economic activity and avoid deflation. The financing of the expanding fiscal deficit, the impaired financial health of the banks, the large and illiquid balance sheet of the Fed, the housing market and Fannie Mae will prevent the Fed from tightening monetary policy in the foreseeable future. We examine each of the aforementioned issues.
U.S. Government Spending and the Deficit
The Federal Reserve's monetary policy will remain geared toward funneling as much inexpensive credit into the financial system as the system will allow, in order maintain low borrowing rates. While this policy has been extremely limited in its ability to encourage growth in private lending and borrowing, it has allowed for the inexpensive financing of the expansion in government borrowing...
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| LEGAL & COMPLIANCE |
Scorecard on Hedge Fund Registration Legislation
By Judith Gross | JGAdvisory
We’re not sure what inning it is, but the hits are coming in fast and furious when it comes to bill proposals for hedge fund registration. Just today, Chris Dodd released the discussion draft of the "Restoring American Financial Stability Act of 2009", which contains within it the "Private Fund Investment Advisers Registration Act of 2009". This follows the bipartisan bill actually passed by the House Financial Services Committee at the end of October entitled the “Private Fund Investment Advisers Registration Act”.
Some of the significant highlights, and key differences, are listed below. Note that there are other provisions of both bills that not addressed here...
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| PENSION PLANS STATUS |
Pensions favor PE buyouts of banks
By Francesco Guerrera and Joanna Chung in New York
A coalition of large US state pension funds has backed the private equity industry’s opposition to new rules on takeovers of troubled lenders, saying the plan would have a “chilling effect” on attempts to revive the country’s banking system.
The warning by funds from states including New York, New Jersey and Oregon, which manage billions of dollars on behalf of public workers and are big investors in private equity, will strengthen the buy-out industry’s lobbying against the proposed measures.
Under the planned rules, unveiled by regulators last month, private equity groups that buy a troubled bank would have to maintain its tier one capital ratio – a measure of financial strength referring to a bank’s equity capital and reserves – to 15 per cent of assets. This would be three times the level of other banks. Buy-out funds would also be banned from selling their lenders for three years.
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| CHRYSLER NEWS |
Chrysler Financial to cease business within 2 yrs | By The Associated Press
DETROIT - Chrysler Financial, once the exclusive lending arm of the storied automaker, will liquidate and go out of business by Dec. 31, 2011, according to a letter from the U.S. Treasury Department.
The long-anticipated move will cost the battered Detroit area thousands of jobs as it struggles with an auto industry downturn and the bankruptcies and government-run restructurings of Chrysler Group LLC and General Motors Corp.
Last summer, Chrysler Financial employed 3,900 people, many at its headquarters in the Detroit suburb of Farmington Hills, although it has been reducing its work force. In September, Michigan had the highest unemployment rate in the nation at 15.3 percent.
Chrysler Financial is in the process of shifting much of its loan business to GMAC under orders from the government, with GMAC becoming the preferred lender for both GM and Chrysler.
The Treasury Department said in the letter to Chrysler Financial dated Thursday that the lender will liquidate its business and repay lenders and investors. New Chrysler loans are going to GMAC, but Chrysler Financial continues to service loans that it made previously on Chrysler vehicles. Chrysler Financial's portfolio has dropped from $45 billion last summer to the current $26 billion....
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HEDGE FUND MANAGERS IN THE NEWS | 10 MOST WRITTEN ABOUT MANAGERS |
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