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Quarterly Research Report- Q1 2009 Preview
In the soon to be released Quarterly Research Report- Q1 2009, BHA analysts highlight and analyze trends in investor interest with regards to alternative funds throughout the quarter. In the hedge fund space, there was a substantial rise in interest in CTA’s, global macro, and short-term trading strategies from investors. Investors consistently reiterated the importance of a fund having highly liquid underlying assets as a reason for their interest in these strategies. During the past quarter, nearly 40 percent of active hedge fund investors interviewed indicated they were currently looking to invest with global macro managers in the upcoming year.
Buyout remains a compelling strategy within the private equity asset class because it’s typically less of a risk to investors than other strategies. Mid-market buyout funds were the most popular within buyout funds, drawing more interest than small- and large-market interests combined.
Throughout the first quarter of 2009, BHA analysts continuously profiled private real estate investors who expressed an interest in distressed LPs. The real estate market has always been an indicator of the overall economy, and distressed funds have the unique ability to capture significant rates of return, while assisting government agencies in restoring confidence in the financial markets.
For more information on these and other trends noticed throughout the quarter, please subscribe to the BHA Quarterly Research Report distribution list by e-mailing Blake Foster at mf@brightonhouseassociates.com.
Hot Hedge Fund Mandate
Posted by: admin in Hedge Funds on March 19th, 2009
An open hedge fund mandate was obtained from a large multifamily office. It is looking to invest in niche and new or interesting strategies that are uncorrelated to current market conditions, such as volatility arbitrage funds. The group will be allocating to new managers in the next six months if it finds the appropriate fit for its mandate. The firm is seeking up to five new managers for potential allocations.
The most important aspect of its search is the funds’ liquidity terms. The firm is presently focusing on opportunities that have high-liquidity terms of weekly or shorter. If the firm cannot receive the appropriate liquidity through the fund structure, it will invest through a managed account structure. The family office has no set return expectations and maintains no strict volatility parameters. These requirements are dealt with on a case-by-case basis. Instead the firm’s focus is on funds exhibiting great risk/reward profiles.
Hot Private Equity Fund Mandate
Posted by: admin in Private Equity Funds on March 19th, 2009
An established European corporation’s pension fund invests five percent of its assets in both single and multi-manager private equity vehicles. The pension scheme is currently focused on distressed and secondary strategies. Toward the end of 2009, it will be considering small- and mid-market buyout investment opportunities. It is strictly focusing on experienced management teams with a proven track record of generating superior returns; the cap size of the fund is not as important. The fund allocates $10 million to $15 million per fund.
New Funds of Funds Mandate
Posted by: admin in Fund of Funds on March 19th, 2009
An opportunistic wealth advisory firm is currently looking for managers of qualified funds of private equity funds. Managers do not necessarily have to have long track records to be qualified; however, funds need to have a minimum of $200 million in assets under management. The wealth advisor invests in onshore and offshore vehicles. The firm will invest with funds that have a lock-up if the length of lock-up is acceptable for its strategy. Its clients require that a manager offer high transparency.
Hot Hedge Fund Mandate
Posted by: admin in Hedge Funds on March 12th, 2009
An investor recently interviewed by BHA is looking to invest capital during the next several months. It has been overweight in a number of strategies, and is looking to draw down capital and diversify.
The firm is looking at two hedge fund strategies in particular: global macro and long/short equity. It is interested in funds that have global exposure; it is not interested in funds that are region-specific or that have majority holdings in one country. Managers are required to have a minimum of $100 million in assets under management.
Also transparency is an important factor in their fund selection process. Monthly transparency reports are required. Leverage is acceptable in moderation, but only in fixed-income funds. The firm is not interested in any moderate- to high-leveraged funds.
Hot Private Equity Fund Mandate
Posted by: admin in Private Equity Funds on March 12th, 2009
A large insurance company based in Switzerland is interested in evaluating private equity funds for 10-20 potential allocations in 2009. The majority of its investments are in mid-market buyout funds; however, it is currently interested in venture capital funds. Funds should be focused on the developed markets in United States and Western Europe. They are interested only in experienced fund managers on their third or fourth fund. They would also be interested in experienced managers spun off from a previous company
Hot Real Estate Fund Mandate
Posted by: admin in Real Estate Funds on March 12th, 2009
A domestic governmental investor recently outlined a real estate fund search with a BHA analyst. The investor, based in Texas invests into real estate directly as well as through funds. They are quite opportunistic and are interested in core, core plus, and value add funds.
In terms of geographic exposure, they are targeting funds focused on the United States. The firm prefers experienced managers in the current market environment. At the current time they are interested in evaluating compelling opportunities.
Distressed Real Estate Funds
Posted by: admin in Real Estate Funds on March 5th, 2009
This week, BHA analysts found a significant increase in the number of investors specifically interested in distressed real estate strategies. This is more than likely due to the turmoil that the overall real estate market has experienced during the past year to 18 months. Real estate funds are finding more and more opportunities to purchase distressed properties in the commercial and industrial spaces at substantial discounts to what many would consider their real market value.
A good example of this trend is a U.S. wealth advisor based on the East Coast. It is not seeking alpha generating programs but rather long-term players that are focusing on quality properties that will see significant gains as the economy begins to rebound.
Another investor, an insurance company in Korea, expressed an interest in distressed real estate funds specifically in the U.S. These funds have taken the brunt of the beating thus far; the value of their holdings has been downgraded and businesses of various sizes have closed locations. This company believes that over time, distressed real estate funds will begin to find opportunity horizons widening as aftershocks of the current economic situation are felt across the globe.
Finally, a wealth advisor based in Virginia mentioned that distressed is of particular interest right now for its clients. The firm seeks to present its clients with the best risk-adjusted opportunities across its portfolio. It believes that real estate funds in the distressed space will give its clients a solid long-term return that will complement its overall portfolio and ultimately hedge against short-term risk.
Of the numerous real estate investors with which BHA analysts have spoken this week, close to half expressed a specific interest in distressed funds. This ratio is an outlier when the overall percentage of investors interested in this strategy year to date is just over 15 percent. Based on this data in the coming months we may find more investors actively looking to take advantage of the recent drop in the real estate markets by taking positions in distressed real estate funds.
New Real Estate Fund Mandate
Posted by: admin in Real Estate Funds on March 5th, 2009
This week, BHA analysts spoke with a U.S. fund of real estate funds that is searching for managers running distressed, value-add, and secondaries strategies within the real estate sector. The fund of funds’ main focus for 2009 is distressed funds; its secondary interest is in value-add and secondaries focused on the U.S., Western Europe, and developed Asia (Hong Kong, Japan and Singapore). The firm does not have any specific target size for funds it invests in, however, it does require a manager to have ten years experience and hold the primary decision making role for at least five of those years. Funds should also be in the top quartile of their peer group with overall returns of at least 20 percent. When reviewing funds, the firm likes to see that leverage is used prudently and there are no recourse loans. The due diligence process will vary from four to six weeks to several months depending on the preparedness of the manager.
New Venture Capital Mandate
Posted by: admin in Private Equity Funds on March 5th, 2009
A wealth advisor based in Germany runs several large funds of private equity funds, with a combined AUM of €5 billion. At this time, it is looking to allocate to venture capital funds by August 2009. The management team should have a track record, however, it may be a new fund. Also, a potential fund should have returns in the top quartile. While the fund may be domiciled either onshore or offshore, the firm is primarily looking for regional funds in the U.S., Canada, Europe, and emerging markets. The due diligence process is rather long and extensive since the firm works with several umbrella firms that have input into its investment process. The typical allocation ranges from €1 to €8 million.
