Societe Generale Sees More Interest In Distressed Investments
03.09.10, 15:32 Uhr
HONG KONG -(Dow Jones)- Investors in Asia have become more keen on distressed investing despite the illiquid nature of such investments, said Antoine Broquereau, Societe Generale SA's managing director of cross-asset solutions and head of structuring group in Asia.
Liquid assets have been trading at a premium as jittery investors have valued liquidity, but investors could be ready to go back into illiquid investments, he said.
"If investing for the long-term, investors can benefit," Broquereau told Dow Jones Newswires recently, noting that the correlation of distressed assets to other markets is less than that of other alternative investment strategies, such as long-short equities or special situations. Moreover, high-yield bonds and leveraged loans have low correlation to government securities.
Hedge funds pursuing a distressed debt strategy have done well this year. According to Eurekahedge, distressed debt funds delivered the best returns across all hedge fund industries this year. The Eurekahedge Distressed Debt hedge Fund Index rose 7.78% from January through July 31.
The global economic downturn has raised expectations about mushrooming levels of distressed debt. The focus of most distressed debt investing is on opportunities in the U.S. or Europe. Asian companies fared better than their U.S. and European rivals during the downturn, offering distressed-debt investors few buying opportunities in the region. Having learned from the Asian economic crisis in the late 1990s, Asian companies generally have healthier balance sheets and less debt.
Asian investors are also interested in equity long-short funds as well as special situations, said Broquereau. Hedge funds following a long-short equity strategy saw nearly US$5 billion in inflows in July, according to Eurekahedge.
However, long-short equity fund managers have been becoming increasingly cautious recently.
The "environment is uncertain and with the possibility of a possible soft patch in the U.S." long-short equity funds "have been dialing down exposure," said Florence Barjou, portfolio manager and cross-asset strategist at Lyxor Asset Management.
Industry insiders say the net exposure at some funds--calculated by subtracting the percentage of short exposure from the percentage of long exposure--has been falling recently, indicating caution.
Much of Societe Generale's fund of hedge funds business is through managed accounts, which are segregated portfolios that work with selected hedge funds to mirror what the funds are doing, but maintain control of capital. Societe Generale has about US$10 billion in managed accounts.
"If investing for the long-term, investors can benefit," Broquereau told Dow Jones Newswires recently, noting that the correlation of distressed assets to other markets is less than that of other alternative investment strategies, such as long-short equities or special situations. Moreover, high-yield bonds and leveraged loans have low correlation to government securities.
Hedge funds pursuing a distressed debt strategy have done well this year. According to Eurekahedge, distressed debt funds delivered the best returns across all hedge fund industries this year. The Eurekahedge Distressed Debt hedge Fund Index rose 7.78% from January through July 31.
The global economic downturn has raised expectations about mushrooming levels of distressed debt. The focus of most distressed debt investing is on opportunities in the U.S. or Europe. Asian companies fared better than their U.S. and European rivals during the downturn, offering distressed-debt investors few buying opportunities in the region. Having learned from the Asian economic crisis in the late 1990s, Asian companies generally have healthier balance sheets and less debt.
Asian investors are also interested in equity long-short funds as well as special situations, said Broquereau. Hedge funds following a long-short equity strategy saw nearly US$5 billion in inflows in July, according to Eurekahedge.
However, long-short equity fund managers have been becoming increasingly cautious recently.
The "environment is uncertain and with the possibility of a possible soft patch in the U.S." long-short equity funds "have been dialing down exposure," said Florence Barjou, portfolio manager and cross-asset strategist at Lyxor Asset Management.
Industry insiders say the net exposure at some funds--calculated by subtracting the percentage of short exposure from the percentage of long exposure--has been falling recently, indicating caution.
Much of Societe Generale's fund of hedge funds business is through managed accounts, which are segregated portfolios that work with selected hedge funds to mirror what the funds are doing, but maintain control of capital. Societe Generale has about US$10 billion in managed accounts.
DJG/voi
