News round-up: Citco: Hedge fund industry pursuing ‘strong resurgence’ in 2021; Investors voice concern over inflation threat; Cowen raids Olivetree Financial with four new hires

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Citco: Hedge fund industry pursuing ‘strong resurgence’ in 2021

More than 82% of hedge funds delivered a positive annual return in the second quarter of 2021, up from 73.4% in the first quarter of the year, revealed research from fund administrator Citco.

The asset servicer said the findings were further proof of the hedge fund industry’s ‘strong resurgence’ this year, as funds delivered an overall weighted average return of 6%, a significant uptick on the 2.75% recorded in Q1.

Citco’s Q2 2021 Hedge Fund Report found that all fund strategies delivered positive returns in Q2 with larger funds sized $3bn plus in assets under administration (AUA) producing the best returns at 7.69% and higher weighted average returns in most categories.

Citco, which has around $1.6trillion in AUA, said there was a ‘strong correlation’ between market volatility and trade volumes; its report showed a dip in trade volumes from the record peaks of March, however Q2 ended with an 8.5% increase in year-to-date volumes up to June compared to the same period in 2020. Trading of equity swaps was also up 44% in Q2 2021 relative to Q2 2020, indicating a broader use of the product.

Increased trade activity was supported by increased investor confidence in alternative investments, indicated the Citco report. Gross subscriptions for Citco-administered funds were $50.5bn in Q2, with a preference for allocations to multi-strategy, global macro, private equity hybrids and funds of funds, while equities and arbitrage experienced net outflows.

Reversing a recent trend, managers in Asia had outflows, while their peers in Europe and North America all added to their capital base.

“With elevated trade activity and capital inflows industry-wide, we continue to emphasise the importance of robust infrastructure and operations for the hedge fund industry,” said Declan Quilligan, Head of Hedge Fund Services, Citco Fund Services (Ireland).

“We are seeing strong appetite from managers to better leverage outsourced middle office solutions and expertise availing of streamlined, digitised and more transparent treasury and accounts payable workflows.”

Investors voice concern over inflation threat

More than half of institutional investors and wealth managers are ‘very concerned’ about the threat of inflation, according to a study from Nickel Digital Asset Management.

The asset manager’s report, which surveyed institutional investors and wealth managers from the US, UK, France, Germany, and the UAE with a collective $275.5bn in assets under management, suggested 55% were ‘very concerned’ and a further 36% were ‘quite concerned’.

Of those surveyed, 43% think inflation in the US will be higher over the next two years than leading authorities are predicting, and only 2% expect it to be lower.  Just over half (54%) believe official predictions are correct. In the UK, 41% of professional investors interviewed believe inflation will be higher than officials are predicting, and just 5% think it will be lower.  Again, 54% believe official inflation forecasts are correct.

In terms of what those surveyed think institutional investors will do to hedge the threat of inflation, 49% said they expect them to invest in cryptocurrencies for the first time, and 45% said those with allocations to cryptocurrencies will increase them.

“Our research shows professional investors are very concerned about the growing threat of inflation, and many fear authorities have underestimated the scale of this problem,” said Anatoly Crachilov, co-founder and CEO of Nickel Digital.

“However, our findings suggest they are taking action to offset this risk, and many are looking to invest in crypto assets for the first time or increase their allocation as part of their plans.” 

Cowen raids Olivetree Financial with four new hires

 Cowen has expanded its Global Alternative Equity Strategies team with four senior hires, in a bid to develop a global advisory business in event-driven investing and catalyst-driven situations.

 The new team members were poached from Olivetree Financial, where they all previously worked with Mark Kelly, Cowen’s recently appointed Global Head of Alternative Equity Strategies. All will be based in London.

 The team will operate within Cowen Execution Services Limited (CESL), and will have a global remit, working closely with Cowen’s Markets team in the US. Their focus will be on advising a range of investors and issuers in how to navigate event-driven investment opportunities and catalyst-driven special situations.

 Tarquin Orchard joins the firm as Managing Director with almost 20 years’ experience in event driven investing, including for RBC Capital Markets, Dresdner Kleinwort, NSBO and Seaport Europe Ltd. Sebastian Greensmith and Charlie Hawkesworth both take on the role of Director, Sales Trader; and Alastair Mankin joins as Vice President, Event Driven Analysis & Sales.

 “The appointment of Mark and his team is in line with the firm-wide strategy of building our business around areas of expertise that differentiate us,” said Matt Cyzer, CEO of CESL. “Leveraging the expertise of this specialist team, the broader investment community can gain significant value from in-depth understanding of the events and specialist situations, which can materially impact their investment performance.”

Stephanie Taylor

Head of Event Content, HFM

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