GLOBAL - Pension analysts have claimed the turmoil in global markets has put hedge fund replication techniques firmly under the spotlight.
With markets suffering sharp losses in recent days, amid signs of a credit crunch, prompted by continuing concern over the extent of the problems emanating from the US sub-prime mortgage market, analysts are awaiting the performance data for hedge fund replication techniques with bated breath.
Phil Irvine, director of advisory services at Liability Solutions, said: “The test will come in the tougher periods. July’s hedge fund research index is showing a small positive return when most equity and bond indices were struggling. This may be revised downwards when more information comes.”
He added: “It can be difficult to judge on the spot so you have to wait a little time until the true picture emerges.”
Larry Jones, CIO of Nedgroup Investments, a provider of actively managed fund of hedge funds, said he felt many hedge fund replication indexes would have suffered during the last part of July and early August.
Meanwhile, Peter Hill-King, manager research consultant at Aon Consulting, said the firm would be closely analysing the data on how replication techniques have coped.
Hill-King said: “We will look at how closely they have tracked the indices and we look at it in context.”
A long period of under-performance could lead to a re-evaluation of their value, said Hill-King.
Michel Jacquemai, a partner at Partners Group, an alternative asset management company, said the big losses were in those illiquid areas that were previously responsible for very steady returns in the hedge fund industry.
He said: “This is the flip side of the coin.”
Jacquemai added that he felt hedge fund replication techniques had weathered the financial storm quite well.
Aside from hedge fund replication techniques, Richard Jones, principal at Punter Southall Transaction Services (PSTS), said he was also keen to see how hedge fund of funds have performed during the volatility.
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