{"id":8581,"date":"2022-01-26T23:19:22","date_gmt":"2022-01-27T04:19:22","guid":{"rendered":"https:\/\/navesinkinternational.com\/?p=8581"},"modified":"2023-12-20T02:53:20","modified_gmt":"2023-12-20T07:53:20","slug":"the-hidden-11-tn-hedge-fund-industry","status":"publish","type":"post","link":"https:\/\/navesinkinternational.com\/2022\/01\/26\/the-hidden-11-tn-hedge-fund-industry\/","title":{"rendered":"The hidden $11 Tn hedge fund industry"},"content":{"rendered":"
The SEC will be asking for increased transparency<\/span> from private hedge funds, a discreet $11 Tn segment<\/span> of the hedge fund industry, by increasing the content and timeliness of the forms PF requirements<\/span>.<\/p>\n <\/p>\n The form PF (PF stands for “Private Fund”) is a quarterly report filed by typically large foreign funds when they sell into the US. The form was formalized in 2009, after the real estate bubble, giving the SEC 10+ years of exceptional insights on the alternative industry.<\/p>\n The filling is quarterly and mandatory, with a 60 day delay. These PF reports are not made public<\/span> by the SEC – unlike the forms ADV, also filled by all hedge funds, which are available to the general public on EDGAR<\/a> \/ the SEC website<\/a> \/ Adviserinfo<\/a>.<\/p>\n Hedge fund privacy is actually an issue for hedge fund industry analysts<\/span>, as researchers can only work with what hedge funds publicly report, instead of how hedge funds truly are. Practically speaking, hedge funds publicly disclose their returns, AUM and terms to half a dozen companies (Eurekahedge, BarclayHedge, HFR, TASS, Preqin, Morningstar…) on a voluntary basis. The coverage universe of these providers are pretty disjoint, meaning that you need access to all of the providers to have a good picture of the industry. And to make it even more impractical, each provider sells its data with its own information structure and classifications, and generally at a high subscription price.<\/p>\n As a result, obtaining a full picture of the hedge fund universe is costly, difficult, and always partial<\/span>. A side-effect is that only the SEC has better information of the alternative industry as a whole, and much more insights than the general public or even its participants on their own industry.<\/p>\n <\/p>\n This being said, there was an interesting research article in 2020 (here<\/a> and below), where the authors have managed to compare the publicly available data to the SEC’s private data<\/span> from PF forms during the 2013-2016 period.\u00a0Here are the main takes of this comparison.<\/p>\n The performance and pricing of funds has some interesting nuggets. Here are the raw statistics :<\/p>\n <\/p>\n <\/p>\n <\/p>\n That so much good performance remains hidden certainly contributes to the perception that hedge funds are not greatly performing assets.<\/span> It probably also confirms that disclosing your returns publicly is a marketing ploy<\/span> to raise assets, and it certainly seems to work.<\/p>\n <\/p>\n <\/p>\n <\/p>\n The SEC wants more transparency on the major events of the funds. It is asking the following new requirements in forms PF:<\/p>\n <\/p>\n The Managed Funds Association, the hedge fund industry’s lobby, supports the SEC\u2019s objective of gathering relevant data from market participants in a crisis, but “will study the details to ensure that this proposal is calibrated to collect information at the right interval and granularity without inadvertently capturing routine activity\u201d. We shall see what they truly mean by that.<\/p>\n But if we can understand that family offices wants and should keep some privacy, asset pools open to a much larger public do not deserve the same confidentiality<\/span>, especially when systemic risk can and do impact the entire economy<\/span>. So it does makes sense for the SEC to ask for a bit more data.<\/p>\n <\/p>\n But maybe the SEC could be more transparent as well?<\/span>\u00a0How about giving the general public and investment analysts access to the some of the data in its vault..?<\/p>\n <\/p>\n <\/p>\n <\/p>\nThe form PF and the lack of transparency.<\/h3>\n
The hidden hedge fund world<\/h3>\n
Industry size<\/h4>\n
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Fund comparisons<\/h4>\n
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Performance and risks<\/h4>\n
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The SEC requirement changes<\/h3>\n
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