the latest data from Hedgebay. *_
A lack of price stability has been the recurring theme of 2010,
evidenced once again when the average trade price dropped to 74 per
cent in November after registering the highest average in six months
during October.
October's high of 81 per cent was the third time in a row the index
had risen, suggesting that consistency might slowly be returning to
the market after a turbulent year. But, the drop shown in November has
cast doubts over that theory, with the volatility now expected to
extend into 2011.
The Hedgebay Index has been inhibited by a distinct absence of funds
trading near par over the last year, suggesting a continued lack of
confidence in the market. A relative lack of pricing transparency has
also bent uncertainty in the market, although Hedgebay believes that
its newly launched Pricing and Valuation Consultancy Service will help
to bring superior insight to this area.
Elias Tueta, co-founder of Hedgebay, says: "In many ways, this
month's results have been typical of 2010. After an unsettled year
of trading on the lesser market, the general sentiment among investors
is one of caution. This has bent an artificial 'cap' on the price
they are keen to pay, and the fluctuations in the index have reflected
that. Every time the price looks as though it is rising consistently,
we saw a fall in the index. There is currently modest to suggest that
that will change in the ahead of schedule part of 2011."
Tueta has also pointed to the recent governmental interventions at
several large hedge funds as a reason for November's drop. The
interventions have made investors nervous that their managers, or
managers on offer on the lesser market, could face the same behavior.
Meanwhile, Hedgebay's Illiquid Asset Index which measures trading in
gated or floating funds rose quite significantly to 44.09 per cent.
Notably, the majority of transactions in November took place in this
part of the market. Hedgebay believes that the surge of trading in
these illiquid assets shows a renewed determination among investors to
clean their portfolios. Two years on from the credit crisis, the
ongoing cost of servicing illiquid assets has proved to be a drain on
investor capital, making the disposal of such assets a necessity.
Tueta says: "There is something approaching fatigue in the illiquid
end of the lesser market, as investors try to start anew in 2011. A
clean portfolio free from illiquid assets will allow investors a clean
bill of health vacant into the first quarter of next year, and free up
capital for some of the funds that have shown excellent performance
this year. This sample of trading will likely continue throughout
December."
Source: Hedgeweek.com
