Hedge Fund Research data show 174 hedge fund liquidations in the third quarter, up from 125 in the second quarter, while the number of openings held essentially steady, at 144. "It is likely that the trends toward funds exhibiting strong performance, lower fees and greater liquidity, as well as continuing interest in risk-parity and risk-premia products, will extend into and drive industry growth in 2019," HFR President Kenneth Heinz.
Investors have made at least $10 billion in bearish bets on high-yield bond exchange-traded funds and derivatives as defense against declining liquidity, according to IHS Markit. Bets against some credit default swaps indexes reached a four-year high last month, according to Citigroup.
India-focused hedge funds had returns of 8.5% during November, outpacing the month's 1.6% average return on emerging-market portfolios, eVestment data show. Such funds, however, are still down 16.3% so far in 2018, making them the year's worst-performing strategy, according to the data.
Some hedge funds struggled this year, but they would be in a far worse position had they not correctly called the flattening yield curve and the US dollar's rise, Jamie McGeever writes. The trend appears set to continue as hedge funds remain long on the dollar against a basket of currencies, while they maintain their position that the gap in yields between two- and 10-year Treasury bonds will flatten.
Apple, Amazon and Microsoft were the top three stock picks among hedge fund managers during the third quarter, according to WalletHub. An analyst says investors still see potential for Microsoft to develop its cloud computing business, while the presence of Amazon and Apple near the top of the ranking suggests they might have weathered the concerns that prompted investors to turn defensive on so-called FAANG stocks during the recent sell-off on Wall Street.
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A measure proposed in Hong Kong would allow locally domiciled hedge funds and private equity funds to be exempt from a 16.5% tax on profits. Paul Ho of EY said the move also could benefit sovereign-wealth funds and encourage more fund managers to relocate to Hong Kong.
Securities and Exchange Commission Chairman Jay Clayton said the fallout from Brexit is "very much front of my mind" in a hearing before the Senate Banking Committee which also covered issues from the communication of stock buybacks to proxy voting. In written testimony, Clayton restated Regulation Best Interest is a priority for the agency but declined to specify a timeline.
A legislative proposal from the Council of the EU would drop replacement of the relevant equivalence framework with national licensing but would give the European Commission authority to impose "operational conditions" on non-EU companies that provide systemically important services.
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Hedge Fund Start-up Guide
AIMA is pleased to have partnered with Bloomberg to produce the Hedge Fund Start-up Guide. Drawing on advice from investors and managers, this new guide provides practical advice for all emerging and start-up managers on how to build a solid foundation and set your fund on the right path -- whether your goal is to build a billion-dollar business or not. We would like to express our sincere gratitude to the contributors that wrote this guide. We would also like to thank AIMA's Next Generation Manager Forum that contributed initial ideas and topics to help structure this guide.