More investment opportunities open for other funds, says BNP Paribas exec
By EMILYN YAP 1 December 2008
The financial storm may have hit hedge fund returns but it is also shaking up the industry in a good way, said chairman of the BNP Paribas Hedge Fund Centre Network, Patrick Fauchier.
He reckoned that as weaker funds and competitors are swept away, there will be more investment opportunities for remaining hedge funds to pursue.
Mr. Fauchier, who is also chairman of fund of hedge funds manager Fauchier Partners, was speaking at the Singapore Management University on Friday last week. He admitted that hedge funds have not done well in the year to date, but pointed out that the industry still outperforms the broader equity market.
According to data provider Eurekahedge, the MSCI World Index shed 19.1 per cent in October while the Eurekahedge Hedge Fund Index (based on funds which had reported their results as of mid-November) dropped 3.9 per cent in the same period.
‘Although in absolute terms the hedge fund industry hasn’t been doing its job so far, in relative terms I’m better off in a fund of hedge funds than in a traditional portfolio,’ said Mr. Fauchier.
And he is confident that hedge funds will do better when markets regain more stability. For one, there will be less external competition as the crisis forces investment banks to fold their proprietary trading desks. JP Morgan Chase was one which did so last month, said Reuters.
Within the hedge fund industry, stronger players will remain. The financial crisis ‘is going to get rid of the people who are not professionally excellent’ and some funds will close, said Mr. Fauchier.
In the meantime, traders leaving proprietary desks could set up their own hedge funds and raise the industry standard further. ‘These managers, (most of whom) are very talented, are going to need to work,’ he quipped.
And with fear leading to indiscriminate selling in the markets, there will be many pricing anomalies for hedge funds to capitalise on, he added
With these factors working in the industry’s favour, the outlook could brighten next year. ‘Probably, we will see the worst at the end of this year,’ he told BT.
While hedge funds have been facing more redemptions, the outflow was mostly money from private banks, said Mr. Fauchier. ‘Professional money’ from investors such as pension funds and endowment funds are still going to the industry, he maintained.
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Hedge fund shake-up positive for industry
More investment opportunities open for other funds, says BNP Paribas exec
By EMILYN YAP
1 December 2008
The financial storm may have hit hedge fund returns but it is also shaking up the industry in a good way, said chairman of the BNP Paribas Hedge Fund Centre Network, Patrick Fauchier.
He reckoned that as weaker funds and competitors are swept away, there will be more investment opportunities for remaining hedge funds to pursue.
Mr. Fauchier, who is also chairman of fund of hedge funds manager Fauchier Partners, was speaking at the Singapore Management University on Friday last week. He admitted that hedge funds have not done well in the year to date, but pointed out that the industry still outperforms the broader equity market.
According to data provider Eurekahedge, the MSCI World Index shed 19.1 per cent in October while the Eurekahedge Hedge Fund Index (based on funds which had reported their results as of mid-November) dropped 3.9 per cent in the same period.
‘Although in absolute terms the hedge fund industry hasn’t been doing its job so far, in relative terms I’m better off in a fund of hedge funds than in a traditional portfolio,’ said Mr. Fauchier.
And he is confident that hedge funds will do better when markets regain more stability. For one, there will be less external competition as the crisis forces investment banks to fold their proprietary trading desks. JP Morgan Chase was one which did so last month, said Reuters.
Within the hedge fund industry, stronger players will remain. The financial crisis ‘is going to get rid of the people who are not professionally excellent’ and some funds will close, said Mr. Fauchier.
In the meantime, traders leaving proprietary desks could set up their own hedge funds and raise the industry standard further. ‘These managers, (most of whom) are very talented, are going to need to work,’ he quipped.
And with fear leading to indiscriminate selling in the markets, there will be many pricing anomalies for hedge funds to capitalise on, he added
With these factors working in the industry’s favour, the outlook could brighten next year. ‘Probably, we will see the worst at the end of this year,’ he told BT.
While hedge funds have been facing more redemptions, the outflow was mostly money from private banks, said Mr. Fauchier. ‘Professional money’ from investors such as pension funds and endowment funds are still going to the industry, he maintained.
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