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Hedge funds 'could have great 2014'

20 January 2014

Investors intend to keep or increase hedge fund allocations, according to new research

Read more: Hedge funds

Hedge funds could see a substantial rise in net inflows over the next 12 months despite disappointing performance across some funds in 2013.

A survey by Barclays’ prime services business of 190 investors representing $490bn AuM, revealed the hedge fund industry could receive up to $80bn in net flows this year.

That figure would represent an increase of almost 25% from 2013, and the largest amount since 2007.

"2014 could be a great year for hedge fund asset raising," said Lou Molinari, head of capital solutions. "While almost half of our surveyed investors felt that hedge funds performed poorly relative to their expectations in 2013, there appears to be no negative impact. More than 90% of even these disappointed investors plan either to maintain or increase their current hedge fund allocations."

Some 60% of net flows is predicted to come from institutional investors, and the majority (45%) is expected to comprise public and private pension funds.

Private investors such as private banks and wealth managers are likely to comprise the remaining 40%.

Investors said they intend to allocate more than half of their net flows to equity long/short strategies.

Event-driven equity and global macro strategies are likely to remain popular, while fixed income relative value and credit strategies "should be prepared to fight for reallocations," said the report.

  • The relationship beeewtn VIX futures and options -- or more specifically, the disconnect beeewtn the cash VIX and VIX options -- should probably be emphasized. Links to the CBOE VIX minisite & the monthly CFE newsletter on volatility that Larry McMillan writes might be useful.The various VIX ratios are interesting, but I haven't found them to be good for capturing the relative intraday movements of the SPX and VIX... stacking the two charts 5-min. or even 1-min one-day charts on top of each other is a good way to see this. Today was a good example of this, going into the close, it looks like the SPX is going to be down about 11, and the VIX will be pretty flat, down about 0.10 -- not particularly profound from a SPX:VIX ratio perspective. But looking at it intraday, we see an opening down move in the SPX and a gap up in the VIX, a steady drop of the VIX during the first hour rally of the SPX, then the VIX rising throughout the market selloff during most of the day, and then AFTER the SPX hit its intraday low and rallied up in the late afternoon, the VIX reached its intraday high and dropped sharply. Finally, as the SPX drifted down into the close, the VIX rose up.Put another way, a comparison of the VIX to the absolute value of the SPX is not nearly as useful or interesting to me as the dynamic, relative movement of the pair. I haven't put enough effort into describing this mathematically, but a crude version would be to plot the % change of the SPX vs. the % change of the VIX.tnt

    Hassen | 25 Aug 2014

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