Hedge funds growth open doors to new financing options

Hedge Funds Growth Open Doors To New Financing Options

Keywords: hedgefund, investment, hedge funds, money, venture, ipo, hedge fund news

According to a recent study of financing options for hedge funds by Standard & Poor’s, the largest hedge fund families manage $10 billion, $20 billion, and even $30 billion today, and at least 100 individual funds have more than $1 billion in assets.

“Funds need to reach the multibillion level so they can access the broader range of funding,” explained Charles Davidson, director in Financial Services Ratings at Standard & Poor’s Ratings Services. Growth of assets size isn’t the way to attract even more assets. A track record that lenders and investors can evaluate is also important.

By now, many hedge funds have a performance history dating back eight to 10 years. The ability to post impressive profits over an extended period raises lenders’ and investors’ comfort level. Redemption restrictions that boost funds’ liquidity also help in obtaining financing.

These factors have enabled hedge funds to expand their financing beyond the traditional choices of collateralized loans through prime brokers, investors’ equity, and their own capital.

Bharat Book Bureau has released a report called “Hedge Funds and Prime Brokers”, the report explores the ever-changing and dynamic hedge fund-prime broker relationship through the use of a panel comprising of some of the world’s experts in investment, law and regulation.

According to the Bharat announcement, it examines how “unregulated hedge funds” are actually regulated already and why more “regulation” may not be required, it also explains just how these prime brokers are regulated in their hedge fund activities, as well as the trading and economic factors that drive the relationship.

The report also looks at the changing relationship between prime brokers and hedge funds, the relationship they have with hedge fund service providers, such as administrators, risk managers, directors, investors and regulators. The legal, regulatory and jurisdictional issues that affect the prime broker-hedge fund relationship, emphasizing relevant laws, listing and continuing obligation standards and agreements.

According to early estimates at the HFN Hedge Fund Aggregate Average was +1.40% in June 2007 and ended the first half of 2007 +7.86%.

The HFN Hedge Fund Aggregate Average is an equal weighted average of all single manager hedge funds and CTA/managed futures products in the HedgeFund database. The increase was the 11th positive month in a row for hedge funds. After trailing the prior three months, the Aggregate outperformed the S&P 500 Total Return which ended June -1.66% and +6.96% YTD. The HedgeFund database consists of over 7,400 current hedge fund, fund of funds, and CTA products.

Contrary to the previous three months, that on average produced positive results despite most major global equity markets falling during the month. What markets did supply in June was a sharp increase in volatility.

The author writes about hedge fund news and blogs at www.hedgefunds-weblog.com


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