From the January 01, 2010 issue of Futures Magazine • Subscribe!

Chinese fund of funds launches

Adveq, a Swiss-based private equity fund of funds manager, and Chinese investment holding company Dalian United Holding announced in December that they would form a jointly-owned investment management company in China. The new company will be the first non-government private equity fund of funds investment company in the People’s Republic of China.

The yet unnamed company will pursue investment management and related service activities in private market investing in China with a prime focus on the formation of Renminbi denominated private equity fund of funds.

Adveq Holding’s Chairman Bruno Raschle said in a statement, “Adveq has been pioneering private equity fund of funds investment management in Europe, North America and across Asia Pacific. Now we are looking forward to doing the same in China.”

Adveq telegraphed its intentions back in August when it released a private equity market outlook on China. The outlook stated that private equity has experienced solid growth in Asia in general and China in particular. It notes that China has increased its share in the Asian private equity market from 8% in 2005 to 29% in 2008 and expects that to reach 33% by the end of 2009.

A spokesperson for Adveq says that private equity differs significantly by region and accessing private equity in Europe, North America and Asia provides diversification.

Stop the bleeding

The number of new hedge funds being created has surpassed the number of hedge fund liquidations for the first time since the financial crisis accelerated in the middle of 2008 according to Hedge Fund Research (HFR).

HFR noted in a report released in December that there were 224 new funds launched in the third quarter and only 190 liquidations. For the year liquidations still outpaced launches 858 to 554.

HFR noted that of the four main strategies, equity hedging saw the most liquidations with 67 and global macro saw the most new launches with 65. \

Managed futures closing strong

In the last several years, managed futures have managed to finish strong in the fourth quarter. While 2008 was a layup year that produced strong returns pretty much throughout the year, from 2003 through 2007 the fourth quarter produced nearly half of the returns in the Barclay CTA Index for each of those years and outpaced the yearly returns in 2004-05.

Commodity trading advisors will need to do that again in 2009 after what has been a disappointing year for most trend following CTAs. While October proved difficult, November was a strong month, producing a preliminary return of 1.86% for the CTA index, moving the index back into black numbers. It could be tough though as many market sectors have reversed in December. Our guess is shorter-term managers will be able to take advantage of reversals in currencies, interest rates and metals but longer-term traders will struggle. But who is to say whether those short-term trends will continue.

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