Sunday, 1 February 2015
Last updated 1 day ago
Oct 26 2009 | 8:57am ET
Hedgebay Trading Corporation has launched a new index to track the secondary hedge fund marketplace.
Elias Tueta, co-founder of the 10-year-old secondary hedge fund provider Hedgebay, believes that the recent turbulence across the global financial sector and hedge funds in particular, has necessitated the creation of the industry’s first index.
“The financial crisis, and the subsequent evaporation of liquidity, has caused the demand for the secondary market to accelerate,” said Tueta. “The volume of trades now being done by buyers and sellers seeking liquidity has contributed to the secondary hedge fund market becoming an established industry.”
The Hedgebay Global Hedge Fund Secondary Market Index provides hedge fund investors with statistics on the key aspects of the secondary market, including the average discount to Net Asset Value of hedge fund shares traded during the month. In addition, the monthly index also includes the average discount or premium to NAV over one year and 10 years, the highest and lowest individual prices of traded assets, and the top two strategies traded.
According to Tueta, the new index has revealed another decrease in the average discount of hedge fund assets in September, the third consecutive month that the index has fallen. The fall, compared to stable markets and good hedge fund performance, has shown that hedge fund investors are still using the secondary markets to resolve discrepancies on their balance sheets, rather than generating liquidity. Tueta says the need for such services has driven higher volume on the secondary markets, with the number of trades for the year up 15% on those for 2008.
The index primarily targets investors in hedge funds, such as fund of hedge funds, pension funds, endowments, foundations, insurance companies, family offices, wealth managers and HNWIs. However, Tueta believes that the index also provides pertinent information for the wider global investment and financial services industry, including leverage providers, regulators, investment banks and prime brokers.
Tueta also says that the index can be used as an early warning system for signs of tension or recovery within the hedge fund sector.
“The secondary market is a highly useful barometer for judging the current mood of hedge funds investors. The discounts at which investors are willing to trade at has proved to be indicative of the confidence, or lack thereof, that investors currently have in hedge funds. The widening or reducing of discounts can similarly be used to gauge the liquidity in the market. This is crucial information for all investors, not just those active in the secondary market.”
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…