Hedge funds, on average, posted strong gains last month. Nearly 70 percent of all hedge funds were in the black in March, according to eVestment, which figures the average fund gained 2.29 percent in March, cutting the loss for the quarter to 0.41 percent. BarclayHedge reports that hedge funds rose 2.53 percent in March, making it the best month since January 2012. Even so, the average fund was down 0.88 percent for the quarter, says BarclayHedge.
According to eVestment, the average profitable fund was up 4.61 percent last month while the average loser was down 2.92 percent. This works out to a 753 basis points differential, one of the largest in many years, according to the report. “This all illustrates the fact the industry is operating in a highly volatile set of markets, and in doing so, producing a wide dispersion of returns,” says eVestment. For the year, 52 percent of all hedge funds were in the black, with the average gain among profitable funds coming in at 4.77 percent.
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Do hedge funds pose a risk to the financial system? Regulators apparently want to know the answer to this question. The Financial Stability Oversight Council voted unanimously to assess the financial stability of the asset management business in general, including hedge funds. According to the Wall Street Journal, Treasury Secretary Jacob Lew said the council, comprised of senior regulators, has determined that most of the leverage in the hedge fund industry can be found among the largest funds. Lew stressed that “greater leverage does not necessarily imply greater risk or systemic risk.” But he also asserted that “the need for further analysis or information sharing is clear.” During the 2008 financial crisis, the government had to bail out a number of the largest banks and investment banks. However, no hedge fund firm posed a risk to the financial system or had to be bailed out or receive government assistance.
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Tiger Global Management made its first new private equity investment in nearly two months. The New York investment firm co-led a $30 million Series C funding round for NestAway Technologies, an Indian-based home-rental management company. “NestAway’s customized strategy has demonstrated the potential to transform India’s rental housing market by leveraging a longterm view of the owner-tenant relationship, says Tiger Global partner Lee Fixel in a statement. “By emphasizing the highest quality of customer service and satisfaction, NestAway is developing an annuity-based e-commerce model at scale.”
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Credit Suisse tweaked its price targets on the two most popular hedge fund stocks. The bank slightly raised its target on Facebook from $140 to $142. “We update our product-by-product forecast following positive takeaways from our quarterly checks,” it told clients in a note. At year-end, 168 hedge funds held positions in the social-media giant, making it the second most widely-held stock among hedge funds, according to Goldman Sachs. Separately, Credit Suisse trimmed its price target on Alphabet—the parent of Google—from $930 to $920 after slightly lowering its estimates. The search giant was the most widely-held hedge fund stock at yearend, with 170 reporting a position in the Internet giant, according to Goldman.
