Discounted Hedge Fund Assets Rise In Q1

Apr 30 2009 | 1:13pm ET

Negative market sentiment and the need for liquidity has seen the pricing of hedge fund shares plummet over the past six months, according to a new report.

The latest figures from secondary hedge fund market provider Hedgebay Trading Corp., which matches buyers and sellers of hedge fund interests and other illiquid alternative investment assets, show that despite a 20% year over year increase in trading of hedge fund assets through March 31, not one trade occurred at, or above, net asset value. This compares with over 92% of trades occurring at NAV, or higher, in 2003, a massive decline in just five years.

Elias Tueta, Hedgebay’s co-founder, said that the real issue in terms of demand is not the availability of cash, but rather the lack of conviction investors have about the state of the markets. He said this phenomenon can be broken down further into two categories:  performance and risk. 

“Investors are trying to sort out which strategies will succeed in the short to medium term and to anticipate any liabilities - either in the form of further redemptions or possible capital calls from private equity commitments. Given the current level of volatility, these are incredibly difficult calls to make.”

Notwithstanding the general negative sentiment in the investment universe, Tueta said bottom selling hasn’t occurred yet and he does not believe a bottom has been put in on the markets or for prices of shares in the hedge fund secondary market.

“There have been no fire sales yet which leads me to believe that there will be a new low at some point in the future,” he said. “A bounce in the market, like the one we experienced in March, might be a golden opportunity to monetize positions. Investors who share this expectation should have limited sensitivity to pricing, as the pricing environment is likely to get worse before it gets better.”

In Depth

Financial Industry Blockchain Consortium R3 To Open-Source Platform Code

Oct 20 2016 | 9:03pm ET

Bitcoin's blockchain technology has spawned a flurry of activity among fintech startups...


Hedge Funds Swarm Into Palm Beach

Oct 27 2016 | 2:32pm ET

As the first flakes of snow fall on New York's northern suburbs, Dan Weil of South...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...