The explosion in trading of equity volatility derivatives since the 2008 financial crisis has spawned an extraordinarily wide variety of approaches, postures, objectives and strategies pertaining to equity volatility. These varied objectives include risk mitigation, directional trading, market timing, volatility risk premium capture and relative value trading. These strategies might include approaches that could be described as systematic, discretionary, quantitative or opportunistic.
It is often easy to assume that macroeconomic indicators are not helpful in predicting the course of markets – the stock market, so the argument goes, is a better barometer. However, research can show that these factors move side by side and can be used to inform the asset allocation decisions a fund takes.
Financial Services Commission (FSC) recently announced proposed changes to regulations regarding asset management businesses and called for industry feedback. A number of the proposed changes include items that will be of interest to foreign asset managers. The updated regulations are expected to be finalised and take effect around November this year.<br />
Although the following would not necessarily reflect the forthcoming amended regulations, the items discussed will provide insights to the direction in which Korean fund regulations are heading. This discussion should provide valuable lead time to strategise your future business opportunities in Korea.
On 23 June 2016, the UK will decide in a referendum whether to remain in or to leave the European Union. Should the UK vote in favour of leaving, so-called Brexit, the UK Government will initiate a procedure leading to the UK's withdrawal from the EU and, ultimately, to the establishment of a new relationship with its former EU partners. Precisely what this will look like, and when it will come about, is uncertain and there is much debate on whether the consequences will ultimately be positive or negative for the UK. What is certain, however, is that Brexit will have a significant impact across a range of sectors - financial services, trade, employment, tax, competition and others. Asset managers, be they based in the UK, the EU or elsewhere, will be caught up in this, and will find themselves affected by Brexit, albeit to varying degrees.
Noemi Holecz, a risk and portfolio manager of Loyal Explorer Fund shares how the fund stands out from competition through advanced quantitative methodologies utilised by Colombus Investment Management.
For most family offices, engaging in direct investment PE deals really means finding the right partner, and the diligence required to find the right PE partner for direct deals is much more involved, and probably less of a metric-based exercise than selecting a good asset manager.
The SEC signals continued scrutiny of asset management firms for all manner of violations — including technical violations first identified in exams. On February 26, Julie Riewe, the Co-Chief of the SEC’s Asset Management Unit (AMU), delivered a speech to the IA Watch 17th Annual IA Compliance Conference that could fairly be described a “state of the unit” address. Titled “Conflicts, Conflicts Everywhere,” Riewe’s speech highlights the AMU’s focus on what the SEC views as conflicts of interest in all shapes and sizes.
Convergence of mainstream asset management and alternative hedge funds has been much talked about for some years but has not been realised on any significant scale until recently. Several forces are accelerating the trend on both sides of the Atlantic.
Managed by Cypress House Asset Management Company, the China Dragon Engine Fund employs a long/short equity strategy, investing in Hong Kong markets and Chinese enterprises that are highly related to China's economic growth. Its CEO, Xiaobo Long reveals the fund's investment strategy in this interview.
Private equity has always thought of itself as the sober end of asset management. In a perfect world, this is how all companies would be managed – lean decision-making bodies focused on well-defined objectives, perfectly aligning capital with business management, away from the short-termism of public markets.
The Alternative Investment Management Association (AIMA) is the global hedge fund industry association representing, amongst others, the managers of more than 70% of the world’s hedge fund assets, and including fund of hedge funds managers, prime brokers, legal and accounting firms and fund administrators. On 27 July 2009, AIMA issued a warning that the European Commission’s draft directive on alternative investment fund managers would be damaging both to fund managers and investors globally, if enacted into European law. This warning also marked the first time that AIMA, which has 1,100 corporate members in 40 countries, has felt the need to coordinate a global press release. Why is AIMA so concerned?
In the early days of the Islamic banking sector back in the 1980s, there was one big debate about whether zero-coupon corporate and government bonds were Shariah-compliant or not. The practitioners were understandably naive then, as no one at that time had addressed some of the core issues surrounding the precise definition of Islamic banking.
Foundation Asset Management (HK) Ltd, regulated by the Securities and Futures Commission Hong Kong, is an independent China-focused asset management company, committed to maintaining a focus on absolute returns and delivering comparative performance through a disciplined risk-adjusted investment process in all markets. In this interview, Eurekahedge speaks to its hedge fund manager and CIO, Michael J. Liang.
There is little doubt that the events of 2008 will have long lasting effects on the asset management industry. Additional oversight and regulatory statutes are a given as a result of this tumultuous year and asset managers around the globe have had to reassess their investment and operational strategies.
While hedge funds struggle to navigate choppy regulatory and market waters, one group of financial professionals is feeding off the frenzy in a big way. Some prime brokers are enjoying an increase in business from hedge fund clients that have been left blowing in the wind by the demise of Lehman Brothers Holdings and others that are scared to swim in the murky waters surrounding Morgan Stanley.
The sequence of adverse financial events characterising the market behaviour of the new millennium has forced institutional investors, such as life insurances and pension funds, to revisit the paradigms applied to manage the asset over liabilities equilibrium. Indeed, potential difficulties embedded in periods of bear equity markets and falling interest rates combined with the increasing longevity (in Western countries life expectation increases by one year every four years) and new accounting rules have fostered the pace at which institutional investors are revisiting the potential synergies between the two fundamental poles of competence: actuary and asset management.
Alternative asset management firms remain the most popular targets in asset management transactions, accounting for a record 32% of transactions announced during 2007. Such shops comprised nearly half the disclosed and estimated value of last year’s deals, despite only involving 26% of the acquired assets under management.
The demand for Shariah-compliant funds is growing. But does the dominance of equity funds over other types of funds indicate a growing asset allocation gap?
The objective of asset management is risk-constrained return maximisation. Since asset returns are ordinarily less than perfectly correlated, the risk to the returns of a group of assets taken together is less than the sum of the risks of individual assets taken in isolation. This is good news for investors with well-diversified portfolios and a major incentive to invest in funds.
The Shariah asset management industry is small but growing. Shariah investment products are found most easily on the equity side of the business. The Shariah committee screens or filters listed securities according to the restrictions and requirements of Shariah law. Portfolio managers then use the approved list of securities to construct an investment portfolio. For the bond and derivative asset classes, an entire industry has yet to be developed, and capital market participants are just gearing up to the market’s demand for products.
SHUAA Asset Management (SAM) is the asset management division of SHUAA Capital psc. It offers a broad range of asset management services in conventional and Shariah-compliant forms, covering 12 countries in the Arab world. SAM currently manages six proprietary open-ended funds targeting the Arab region, which give regional and international investors access to the Arab stock markets under its coverage. It also manages six third-party investment funds sponsored by leading financial institutions in the Arab region and offers discretionary portfolio management services. Assets under management as at 31 March 2006 stood at AED6.12 billion (US$1.6 billion).
Value Star is an asset management company focusing on investments based in the Greater China region, with its research team based in Beijing. Value Star runs a long/short strategy focusing on Greater China, with an AuM of US$20 million.
Cole Asset Management (CAM) was formed in 2004 as an investment advisor, and its first proprietary product, Tellus Natural Resources Fund, a fund of funds dedicated to the commodities and natural resources sector, was launched in February 2005. Brad Cole has more than 20 years of industry experience, including ten years on the floor of the CME trading futures and options, then as part of a successful Chicago-based CTA. Developing and dissecting trading approaches has been at the heart of Cole’s investment career since 1980. Rian Akey, COO, has been working with CAM for more than seven years, primarily in a research and due diligence capacity.
Pinpoint Asset Management manages the China-dedicated Pinpoint China Fund. The fund was launched in June last year and currently has around US$40 million under management. The total return since inception was 45% net till the end of March 2006.
More money is flowing into the foreign exchange markets than ever before. The latest triennial survey by the Bank for International Settlements (BIS) released during 2005 revealed that daily foreign exchange turnover had soared to US$1.9 trillion in 2004, up from US$1.6 trillion in 2001. This growth is being propelled by trading from non-bank financial institutions – pension funds, asset managers and, perhaps most strikingly, hedge funds.
The assets under management of all the domestic funds put together today stand at a healthy US$44,000 million. Apart from foreign fund houses who have set up shop in India, many Foreign Institutional Investors (FIIs) and hedge funds are also very optimistic about India. HSBC, Deutsche, Fidelity, SunLife are only some of the names who have entered the Indian investment management market. The keen interest of global fund houses in India coupled with booming capital markets has opened up a very key opportunity; that of providing services to these fund houses in India. With the increase in number of players, there is an increasing pressure to perform and cut down margins. One efficient and effective way of achieving this was to replicate the model of "outsourcing" in India.
New York-based StoneWater Capital is founded and run by a group of partners with significant public and private equity investment experience. Founded in 2004, StoneWater Capital is a specialised asset management firm and manages over US$150 million in a global family of long bias fund-of-hedge fund vehicles as well as custom vehicles and other investments.
The past thirty years have witnessed an increased separation between the ownership and the control of financial wealth. The emergence of modern portfolio theory, the increased efficiency of markets, and the growing sophistication of financial instruments have convinced many, if not most, investors to delegate the management of their portfolios to professional asset managers and their collective investment vehicles. Investment advice is now becoming a commodity.
Singapore-based Quant Asset Management was co-founded by Frank Holle and Chatchai Ngampakdeepanich.
QAM manages the QAM Global Equities Fund and the QAM Asian Equities Fund. Both funds were launched in April 2004. The QAM Asian Equities Fund has returned 34% since inception with an annualised return of 37% and annualised volatility of 23%. The QAM Global Equities Fund has returned 29% since inception with an annualised return of 32% and annualised volatility of 16%.
With the notification of the Securities and Exchange Board of India (SEBI) (Mutual Funds) Regulations, 1993, the asset management business under the private sector took its root. At present, there are 28 mutual funds in India offering different schemes tailored to meet investors' growth, safety and income requirements.
The asset management industry is changing fundamentally, and aligning itself much more with investor needs. One facet of this is the increasing importance of absolute return managers providing a pragmatic mix of alpha and beta.
Conventional managers are tied closely to market risk ("variance" away from market risk is considered risky) and therefore by definition are precluded from generating much alpha. However, fees have historically defied the empirical and intuitive evidence, and have been high. Now they are falling rapidly.