New product launches for October

In the first week of October, there was a considerable increase in the number of active equity launches as compared to the last week of September. But the number of new launches posted a sharp decline in the active as well as passive equities during the rest of the month. Thematically the focus of new launches was on undervalued stocks, especially in the financial services sector, including an Asian, a French and a global equity fund investing in undervalued stocks in banks and insurers. Some of the more prominent AMC noted were DWS, Allianz, UBS, Templeton, Dexia and Lazard.

New passive equity launches in October posted a sharp decline similar to active equity launches and the overall number of new launches was much less than observed in September. ETF launches noted were largely equity based, whereas no commodity ETF launch was observed this month. Some interesting ETF launches included South Africa’s first fixed income ETF offering investors access to government bonds and an ETF fund of funds investing in international and European government bonds. There were sector focused ETFs such as real estate ETF and infrastructure ETF. Lyxor (SocGen) dominated the ETF launches last month with six new ETFs covering EU, Malaysia, Taiwan, Thailand and Africa.

As compared to September, new fixed income launches posted a slight increase in number in October. On a weekly basis, the third week recorded the highest number of new launches. But no new product was noted towards the end of the month. Amongst the new launches this month, two opposite investment trends namely investing in high yield and investing in high quality government securities were noted. The trend towards investing in distressed markets picked up with the observance of three funds focusing on high yield markets as compared to September. The trend towards investing in high quality government securities picked up with the observance of 6 new funds launched. This trend has been contrary to the trend of emerging market debt, strongly observed in September. Norwich Union with its Strategic Bond Fund and High Yield Bond Fund and Aviva with its High Yield Bond Fund and Romanian Fund were prominent amongst the more notable AMCs.

In October, the total number of launches observed amongst alternative investments showed a sharp decrease as compared to September. The number of new launches in the first and third week of October was comparable to the new launches in the last week of September, but in the second and the fourth week the number of new launches saw a steep decline. The prominent names last month included F&C, Julius Bär, Macquaire, Natixis and Softbank.

The tactical strategies with a focus on long/short continued to be prevalent amongst new single hedge funds. Similar to September, hedge funds focusing on market dislocations were prominent with a launch of a market neutral hedge fund focusing on credit market dislocation, a credit hedge fund making investments in US leveraged loans and distressed markets and a carbon fund concentrating on dislocations in carbon market. Carbon, energy and gold were the themes used for new single hedge fund launches.

Shipping continued to be the common theme amongst the new private equity launches, followed by aircraft. Additionally themes such as energy, oil and gas, forest, water, and clean-tech were featured by the new launches.

Some interesting private equity launches were an Islamic private equity fund focusing on financing potentially new growth industries such as biodiesel, biomass and agri-bio and a forest fund concentrating on Eastern Europe, the US and Australia.

From November onwards, we would be covering a commentary on the new product launches in and for the MENA region. If interested, please drop us a line at fund-research@sganalytics.com

New fund launches

The recent turbulence has caused a slight slowdown in the launch of new funds. The first week of October saw the new launches in equity funds focus regionally on emerging markets and GCC and thematically on fundamental stock picking. New fund launches noted in Asia and GCC included houses such as Temasek / SBI (Japan), Principal PnB, Alceda, Sydinvest – a Danish Asset management company, Dexia, New York based Oranda capital management and Lazard. Emerging markets were also the most prominent theme in ETFs (Exchange Traded Funds) with 4 out of 6 ETFs launched by Lyxor (part of SocGen) covering Malaysia, Taiwan, Thailand, Pan Africa. Fund of fund launches last week showed no prevalent strategy with asset management companies such as Alte Leipziger Trust, DWS, Alceda, and International Value Advisers launching mixed fund of funds.

Hedge funds are facing redemption pressures due to credit crisis and market volatility and the regulators expecting a large number of hedge funds going belly up. In spite of this last week, a number of new tactical long short hedge funds were launched. These launches include one by former Pequot Capital portfolio manager, Gregory Spiegel, founder of New York based Riptide Capital, one by former portfolio manager for Ensign Peak Advisors, Jennifer Johnson, founder of Coraticum Asset Management and Hancock Bank. Multi strategy hedge fund launches included ones by Corazon Capital, Taylor Asset Management and Star Hedge Managers Corp.

In spite of the leverage crunch, a few thematic private equity launches were noted last week. These included a shipping fund by Northern Shipping Fund, a forest fund by Catella Real Estate and a media fund by Jerusalem Venture Partners. In the real estate and infrastructure Asia ex Japan, primarily India and China still featured as the main investment destinations with new launches from MPC, Invesco and DIFC Investments.

Marked by the Market

Post Warren Buffett’s investment in Goldman Sachs and GE, two articles in the past weeks caught my attention. The first article described in detail how the Oracle of Omaha made USD 783 mn on his Goldman investment based on the combination of the 10% preferred stock and the option to buy USD 5 bn worth of Goldman stock at USD 115 per share in the next 5 years. The second and the most recent article spoke about how the greatest value investor had his entire profit wiped off. Whilst the rising and falling prices do not affect long term investors such as Warren Buffet who do not look at the value of their portfolio daily they definitely do impact a large part of the financial community who do. The value of both an individual’s and an institution’s holdings are determined by and are subject to the vagaries of market. A portion of the share holder value has eroded due to expected business performance while the rest has eroded due to liquidity and credit crunch.

This raises some key issues which the US policymakers have also questioned. These questions revolve around the valuation techniques and the mark to market mechanism used by the accountants as required by the regulations and compliances. Is mark to market fair to the professional investors who do not have the luxury of “picking” and “holding”? Accounting has been conveniently blamed in the past – will it undergo a transformation this time too?