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• Financial Times (07/03/2011)<br />
Hedge fund indices’ accuracy in question<br />
“(...) Industry-wide performance indices are an<br />
excellent recruiting sergeant for the hedge fund<br />
industry. These indices, published by a number of<br />
data providers, typically boast attractive annualised<br />
double-digit returns with scarcely a down year, the<br />
industry’s annus horribilis of 2008 excepted. But how<br />
confident can investors be that these indices provide a<br />
true reflection of the returns of the underlying hedge<br />
fund industry? The <strong>EDHEC</strong>-<strong>Risk</strong> <strong>Institute</strong>, an arm of<br />
France-based <strong>EDHEC</strong> Business School, stirred the pot<br />
recently when it stated that “the performance of multistrategy<br />
indices whose portfolios included illiquid [or<br />
less liquid] strategies was extraordinarily overstated<br />
after mid-2008”. Felix Goltz, head of applied research<br />
at <strong>EDHEC</strong> added: “It is more and more difficult to<br />
justify the use of non-investable composite indices<br />
as benchmarks unless we can suggest a practical and<br />
easy-to-implement solution that could substantially<br />
reduce the biases that overstate their performance,<br />
especially in periods of market stress.” (...)“<br />
Copyright Financial Times Fund Management<br />
Short selling ban:<br />
• Global Pensions (09/03/2011)<br />
European Parliament backs naked short selling ban<br />
“(...) The moratorium applies to shorting sovereign<br />
debt, where sellers do not simultaneously hold<br />
offsetting, long positions in that debt. National<br />
regulators fear the activity could cause mispricing<br />
and, in extreme cases, downwards price spirals, the<br />
EC says. But <strong>EDHEC</strong> said intermediaries and regulators<br />
will be unable to verify long positions the CDS hedge<br />
is assumed to cover. A ban makes it more difficult for<br />
countries to manage interest rate risk on their debt<br />
actively, because counterparties would be barred from<br />
hedging the country risk of interest rate swaps they<br />
had entered into, <strong>EDHEC</strong> added, saying “such active<br />
management of the yield curve is a major component<br />
in the optimisation of the cost of public debt.“ It<br />
added that defining “naked sales“ too strictly will<br />
make it impossible for financiers to hedge the default<br />
risk of public or private entities they supported, where<br />
those entities did business with sovereign nations.<br />
“At a time when public-private partnerships and<br />
private financing of public infrastructure projects<br />
are considered one of the drivers of global growth,<br />
making it harder to manage country risk may at the<br />
very least increase the costs of these partnerships and<br />
this financing,“ <strong>EDHEC</strong> wrote. (...)“<br />
Copyright Global Pensions<br />
• Financial <strong>News</strong> (09/03/2011)<br />
Fears grow over CDS restrictions<br />
“(...) In a statement issued yesterday, <strong>EDHEC</strong> <strong>Risk</strong><br />
<strong>Institute</strong>, an academic think tank, added that the<br />
proposed rules could deter companies from financing<br />
major projects in foreign countries or entering into<br />
contracts with governments as they would not be able<br />
to hedge the default risk of their counterparties. (...)“<br />
Copyright Financial <strong>News</strong><br />
<strong>EDHEC</strong>-<strong>Risk</strong> <strong>Institute</strong><br />
• <strong>Risk</strong>.net (25/01/2011)<br />
<strong>EDHEC</strong>-<strong>Risk</strong> <strong>Institute</strong> makes Asian debut in<br />
Singapore<br />
“(...) <strong>EDHEC</strong>-<strong>Risk</strong> <strong>Institute</strong> has opened its first Asian<br />
office in Singapore and named Frederic Ducoulombier<br />
the director of the <strong>EDHEC</strong>-<strong>Risk</strong> <strong>Institute</strong> Asia, heading<br />
the operations and business development of the risk<br />
research institution in the region. Ducoulombier will<br />
be based in Singapore and report to London-based<br />
Noel Amenc, director of <strong>EDHEC</strong>-<strong>Risk</strong>. The institute is<br />
planning to conduct research on the uses of volatility<br />
derivatives in equity portfolio management and also<br />
volatility indicators for Asia. it will also research<br />
extreme risk measures for hedge funds and volatility<br />
risk exposure of hedge funds. Amenc said the growing<br />
influence of Asian markets and investors requires more<br />
industry-relevant academic research be performed in<br />
the region. (...)“<br />
Copyright Incisive Media Investments Limited<br />
<strong>EDHEC</strong>-<strong>Risk</strong> <strong>Institute</strong> <strong>Partner</strong> <strong>News</strong> - Issue nº 5 - April 2011 - 7