23095052321715661284394680

  Stone Mountain Capital - Alternative Investment Advisory
  • About
    • Switzerland
    • United Arab Emirates
    • Estonia
    • Partners
    • Ventures
  • Team
    • Oliver Fochler
    • Ashvin Chotai
    • Pascal Hasler
    • Alexander Rothlin
    • Claudio Calonder
    • Joaquin Abos
    • Alliances
  • Advisory
    • Corporate Finance
    • Solutions
    • Mandates
  • Research
    • Perspective Subscription
    • News
    • Awards
  • Contact
    • Privacy Policy
    • Anti-Bribery Policy
    • UK Stewardship Code
    • ESG Policy
    • Disclaimer
  • Login

Alternative Markets Update Q3 2019

24/10/2019

 
*|MC_PREVIEW_TEXT|*
RESEARCH PERSPECTIVE VOL.118
October 2019
Alternative Markets Update Q3 2019
Hedge Funds
After strong gains during H1 2019, hedge funds remained more or less at the same level in Q3 2019. In July and August, the performance of our strategies rose about by 0.40% each, while declining in September by approximately 1.20%. When comparing the YTD of Q3, shown in Figure 1, with the results from Q2, our credit strategies gained about 1.5% and is currently at 3.61%. The equity strategies dropped by around 2.6% to a YTD of 10.14%. Tactical trading strategies suffered the most with a loss of more than 10%. However, these strategies were still the most profitable as of Q3 2019 with a YTD of 23.24%. Lastly, the fund of hedge fund strategies fell about 0.6%, currently at a YTD of 6.16%. When looking at the strategies individually, Bitcoin Altcoin Actively Managed remains at the top with a YTD of 128%, despite losses in the last three consecutive months. The Discretionary Global Macro strategy performed exceptionally well in July and August, resulting in a YTD of 58.62%. The equity strategies suffered in the last month, however, the Long-only US Equities High Conviction and Long/Short US Equities Disruptive Technologies still have a YTD of 20.72%, 18% respectively. Our volatility strategy achieved a YTD of 15.93% and never dipped below -0.5% on monthly performance level.
Credit/ Fixed Income  YTD 2019 Annualised Return Annualised Volatility Sharpe Ratio Sortino Ratio
SMC Credit Strategy Index 3.61% 8.76% 4.46% 2.90 0.26
Credit Suisse Fixed Income Index 3.73% 5.03% 4.96% 0.61 -0.29
HFRX Credit/ Fixed Income Index 3.59% 5.10% 4.98% 0.62 -0.39
Eurekahedge UCITS Fixed Income 5.71%* 2.84% 3.38% 0.25 0.33
BofA ML US Corporate Master Index 12.95% 7.43% 6.26% 0.87 -0.15
Equity YTD 2019 Annualised Return Annualised Volatility Sharpe Ratio Sortino Ratio
SMC Equity Strategy Index 10.14% 11.04% 14.31% 0.61 0.21
Credit Suisse L/S Equity Index 6.77% 8.50% 8.83% 0.74 -0.06
HFRX Equity Hedge Index 7.87% 4.92% 7.76% 0.38 -0.23
Eurekahedge UCITS Long Short Equity 2.92%* 3.39% 5.44% 0.25 0.35
S&P 500 18.09% 7.45% 14.32% 0.38 -0.09
Tactical Trading YTD 2019 Annualised Return Annualised Volatility Sharpe Ratio Sortino Ratio
SMC Tactical Trading Strategy Index 23.24% 24.12% 24.14% 1.15 0.50
Credit Suisse Global Macro Index 9.56% 9.53% 8.53% 0.88 -0.02
HFRX CTA Index 8.30% 3.77% 9.28% 0.19 -0.30
Eurekahedge UCITS CTA/Managed Futures 12.30%* 2.77% 8.02% 0.10 0.13
HFRX RV Volatility Index 11.14% 4.23% 4.92% 0.45 -0.34
CBOE Eurekahedge RV Volatility Index -0.04%* 7.73% 3.79% 1.51 2.92
HFR Cryptocurrency Index 35.13% 110.39% 93.90% 1.15 0.88
Fund of Hedge Fund YTD 2019 Annualised Return Annualised Volatility Sharpe Ratio Sortino Ratio
SMC FoHF Strategy Index 6.16% 5.89% 6.77% 0.59 -0.21
HFRI FoHF Index 5.85% 6.36% 5.41% 0.81 -0.34
Eurekahedge UCITS Multi-Strategy 4.01%* 2.55% 3.71% 0.15 0.20
SMC Single Manager Cross-Asset Index 12.53% 14.97% 14.30% 1.64 0.33
SMC Cross-Asset Index 12.00% 14.21% 13.68% 1.55 0.29
Figure 1: Overview of Performance of Different Hedge Fund Strategies: September 2019, Source: Stone Mountain Capital Research
The market capitalization of the hedge fund industry is $3.6bn, as of July 2019. Most of this capital is managed in the US, as the US contributes $2.7bn to this global market capitalization. In Q3 2019, 67 funds were launched, of which 84% are hedge funds (see Figure 2). Due to the current macroeconomic climate, many managers take a more conservative approach. Furthermore, the number of funds launched sharply decline when comparing Q2 and Q3 2019. In Q2 2019 121 funds were launched. Regarding the geographic focus of the hedge funds, there is a shift towards North America, which rose to 33% in Q3 2019, while it was only 19% in Q4 2018. Global orientation fell from 64% in Q4 2018 to 48% in Q3 2019.
Figure 2: Overview of Funds Raised by Structure: September 2019, Source: Preqin
The hedge fund industry is affected by the current economic situation and faces hesitant investors. Consequenctly, raising money got more difficult, which is highlighted by the fifth consecutive quarter with more redemptions than investments. Regarding the next 12 months, 73% of investors are committing less than $50m, while only 7% are considering investing more than $300m. Figure 3 shows the expected investment in the next 12 months sorted by the size of the investment. Long/Short Equity remains by far the most popular strategy with 51%, followed by macro, multi-strategy and equity market-neutral strategies.
Figure 3: Size of the expected Commitments of Investors within the next 12 Months: September 2019, Source: Preqin
Cryptocurrencies
Cryptocurrencies started strong in H1 2019, and reached its highest value after the peak at the end of 2017. However, after H1 2019, values started to decline again. Bitcoin is currently (as of 23rd October) at $7,500. This year's peak was at $12,587 in the end of June 2019. Previously, it stayed a longer time on $3,000 and $6'000. The market capitalization reached $224bn in June and fell to $143bn in the middle of October 2019. The price development of Bitcoin is visible in Figure 4 below. Ethereum, which experienced a similar development in 2017 as Bitcoin, remained relatively stable in this year. Its value dropped from $348 at the end of June 2019 to $160 in late October 2019. Percentagewise this is a steep decline. However, when comparing it to the $1,434, it reached in January 2018, these developments are rather small. Furthermore, when comparing the graphs of Bitcoin and Ethereum, Ethereum's development is almost flat, while Bitcoin moves quite a lot. The market capitalization of Ethereum dropped similar to its price, namely from $37bn in June 2019 to $18bn in October 2019, of which both are very small compared to its peak in January 2018, where it reached $130bn. The following Figures 4 and 5 show the development of Bitcoin and Ethereum from 2017 until mid-October 2019.
Figure 4: Market Capitalization and Price in USD of Bitcoin from January 2017 up to October 2019, Source: CoinMarketCap
Figure 5: Market Capitalization and Price in USD and in Bitcoin of Ethereum from January 2017 up to October 2019, Source: CoinMarketCap
Private Equity
In 2019, the aggregated capital of private equity funds fell sharply, as shown in Figure 6. While in January 2019 $972bn were aggregated, it fell to $751bn in October 2019. Furthermore, as a consequence the number of funds also fell, however, this decline is far smaller than in the aggregated capital. The dominant fund types remain buyout and venture capital. Venture capital funds are responsible for 60% of the funds, but only account for 25% of the aggregated capital. Buyouts are the opposite, as only 12% are buyout funds, despite being responsible for 41% of the aggregated capital. In the secondary private equity market, funds saw sales of their investment, which were on average 6% higher than their net asset value, which is significantly higher than in the prior survey from Palico. In Q3 2019, half of the funds sell at par or higher, which is a decline from about two thirds in record year 2018 and H1 2019. Funds of an age of at least ten years, are seeing a decrease in interest, as the number of funds dropped from about 33% to 24% in the last six months. This is due to holding a lower variety of assets; thus, having an increased risk compared to younger, more diversified funds. This finding is further supported by the average age of funds, which dropped from 7.6 to 6.8 years in the last half year. Regarding the volume of the secondary private equity market, it is estimated at $40bn at H1 2019, and an estimate of $60bn for Q1-Q3 2019. This is close to last year's record of $70bn at the end of Q3. As the volume typically accelerates towards the end of the year, it is assumed, that the industry will reach a volume of $90bn to $100bn, which leads to an estimated AuM of $5.8bn. This AuM incorporates buyouts, growth, real assets, venture capital and credit strategies. According to TMF, ESG-oriented funds are on the rise, as the AuM grew 40% to €684bn between 2015 and 2018. Furthermore, in 2018 290 ESG-oriented funds were launched. In the US, the AuM doubled in the same period, reaching almost $90bn.
Figure 6: Number of Funds Raising and Aggregated Capital from January 2015 to October 2019, Source: Preqin
2019 has started at a relatively low level of raised capital. However, since Q1, the capital raised increased continuously with $138bn in Q2 and $163bn in Q3 2019, as shown in Figure 7. The generation movements towards fewer, but bigger funds are also showing in the private equity market, as the number of funds closed reached the lowest level within the last five years, with only 260 funds closed. Regarding the geographical focus, North America remains the most important market by far with an aggregated capital of $105.9bn in Q3. Otherwise, there was a huge shift from Europe towards Asia. Asia-focused funds have raised $40bn in Q3, which is more than Q1 and Q2 together. Europe-focused funds raised only $14bn in Q3, which is less than half of the results achieved in Q2 2019.
Figure 7: Number of Funds Closed and the Aggregated Capital Raised from 2014 to Q3 2019: October 2019, Source: Preqin
The European private equity deal value rose 12.2% from Q1 to Q2 2019, even though the number of completed transaction continuously declines. However, due to the presence of more and more mega-funds, the average deal amount rises. For example, the current median deal value is €27.9m, while it was below €20m in 2017. The importance of the mega-funds is highlighted in the following two figures, which show the impact of the size on the deal value, as well as for how many transactions these sizes account. It is visible that the deal size is rising, as commitments of below €25m steadily decline. With an exception in year 2019, there is also tendency towards more investments greater than €100m. In Figure 9, it is highlighted, that deals up to €1bn are responsible for about 80% of the deal value in total.
According to Palico's survey, in the secondary private equity market, $130bn of cash is available. Furthermore, due to the intensely competitive environment, there is a shift towards more leverage, in the form of loans, deferred payments and preferred equity, which accounts for 45% of the volume, compared to 4% back in 2013.
Figure 8: Number of Deals split across Size of Investments from 2009 to H1 2019: August 2019, Source: Pitchbook
Figure 9: Value of Deals in € split across Size of Investments from 2009 to H1 2019: August 2019, Source: Pitchbook
Private Debt
The volume of private debt is constantly growing, as shown in Figure 10. In September 2019, the number of funds raised as well as the aggregated capital reached is higher than in the previous years. However, since the beginning of Q3 2019, the number of funds raised remained stable at 417, while the aggregated capital fell slightly. Direct lending remains the most important driver for this development as it accounts for $90bn to the aggregated capital. Direct lending is further discussed below.
Figure 10: Number of Funds Raised and Aggregated Capital from 2017 to September 2019, Source: Preqin
European private lending deals tend towards 100 in each quarter since Q3 2017, with several being higher and some are being lower. As of Q2 2019, the number of deals stopped declining, and resulted in 24 more than deals than in Q1 2019, which is shown in Figure 11. The key driver of the private lending are buyouts and M&A, which are responsible for 64% of the European deals. 
Figure 11: European Deals Completed by 55 Alternative Lenders from Q4 2012 to Q2 2019: October 2019, Source: Deloitte
The global fundraising of private lending seems on its way to a new record in 2019. Figure 12 shows, that the volume of the first two quarters never was that high, not even in 2017. However, the number of funds is a lot smaller than in the other years, which shows that there is a tendency towards fewer funds with higher amount of cash available.
Figure 12: Global Fundraising sorted by Quarter from 2015 to Q2 2019 (based on 55 Alternative Lenders): October 2019, Source: Deloitte
The development of dry powder in the private debt market is contrary to the development in hedge funds. Investors are planning to increase the size of their commitments, despite a drop from 11% to 8% in commitments of more than $500m. However, commitments below $50m dropped as well, while commitments between $100m and $499m gained 10%, which means that they are responsible for 29% of the planned commitments, as visible in Figure 13.
Figure 13: New Capital Investors are Planning to Commit to Private Debt Funds within the next 12 Months: October 2019, Source: Preqin
Real Estate
The real estate industry started relatively slow into the year 2019. This slow start was offset and kept growing during Q3 2019. Figure 14 shows the development in number of private funds closed and their aggregate capital. The number of funds rose tremendously from 634 in January 2019 to 856 in October 2019. The aggregate capital rose as well, however, not as much as the number of funds. The growth in the market capitalization outpaced the growth in the whole year 2018 already at the beginning of October for the year 2019. Most of the capital flows into value-added or opportunistic funds, which account for 61% of funds, respectively 60% of the aggregate capital. Further significant portions of the capital are allocated to debt and core strategies. Funds sizes of more than $500m account for around 60% for the market size.
Figure 14: Number of Funds Raising and Aggregate Capital from Januray 2015 to October 2019, Source: Preqin
The real estate market became more attractive during 2019, as interest rates in general fell, which increases the demand for alternatives, such as real estate. Increased investments, however, also increase the risk of bubbles. Especially in the Eurozone, there is an increase of bubble risk in all cities. Figure 15 shows the Real Estate Bubble Index from UBS for major cities around the world. Despite the favourable economic conditions, except the political risk in certain areas, the average price growth has come to a standstill for the first time since 2012. Due to the current development, Paris and Frankfurt have surpassed the benchmark, and are in the area of considerable bubble risk.
Figure 15: Real Estate Bubble Index in various Cities: October 2019, Source: UBS
The positive development of the market capitalization and number of funds existing, also benefits the fundraising in the industry. As of Q3 2019, real estate funds raised $121bn, which keeps the industry on track to break annual fundraising record. Figure 16 also shows, that the trend of consolidation increases even further. The number of funds closed already fell tremendously from Q4 2018 compared to Q1 2019. After a slight increase in funds closed in Q2, Q3 fell to only 48 funds closed. However, the $37bn raised in Q3 is among the highest aggregate capital raised. Important to note is, that the results of Q3 are strongly distorted by the closing of Blackstone Real Estate Partners IX with $20.5bn. Almost $29bn were raised in North America, while Europe accounts for $5.9bn and Asia for $2.7bn. 
Figure 16: Number of Funds Closed and Aggregate Capital Raised from Q1 2014 to Q3 2019: October 2019, Source: Preqin
The confidence of investors seems to have decreased in the real estate market. Compared to Q3 2018, in Q3 2019, investors are planning to commit 14% more investment below $50m. Especially investment between $50m and $300m have decreased, while investments above $300m rose by only 2%, as shown in Figure 17. Lower risk strategies such as core or core-plus have gained 34%, while riskier strategies dropped by 23%. Geographically, the focus from North America, Asia and the emerging market has shifted towards Europe and the rest of the world, whereas North America lost 14%, Asia-Pacific 7% and emerging markets another 5%. On contrast, Europe gained 6% and the rest of the world gained 3%. Global investments remain at the same level as a year before.
Figure 17: Size of Planned Investment in Private Real Estate Funds within the next 12 Months: October 2019, Source: Preqin
 
STONE MOUNTAIN CAPITAL
Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London and Swiss representative office. We are advising 30+ best in class single hedge fund and fund of fund managers across equity, credit, and tactical trading (global macro and CTAs). In private equity and private debt, we advise 10+ general partners across the sectors real estate, infrastructure / real assets and capital relief trades (CRT) by structuring funding vehicles, rating advisory and private placements. As per 26th April 2019, Stone Mountain Capital has total alternative Assets under Advisory (AuA) of US$ 53.8 billion in hedge funds and private assets. Stone Mountain Capital has arranged new capital commitments of US$ 1.54 billion across hedge fund, private asset and corporate finance mandates and has been awarded over 30 industry awards for research, structuring and placement of alternative investments.
 
Our Team   Our Solutions   Our Mandates   Our Research   Our News
 
 

Contact

We are able to source any specific alternative investment search and maintain relationships with dozens of best-in-class hedge fund managers, private equity and private debt general partners (GPs) and real estate and infrastructure developers. We don’t pass any costs on to our investors, since our compensation comes from our mandated managers, GPs and developers. Please contact us, should you require further information about our solutions.  

Schedule a call with the team
We have updated our privacy policy to take into account the new requirements of the GDPR. Please take some time to read the policy, which explains what personal data we collect, why we collect it, how we use it and other relevant information. You can review our privacy policy here, our anti-bribery policy here and our commitment to the UK stewardship code here.

No action is required if you wish to remain in contact, however please reply if you want your details removed by contacting us at [email protected] or by using the unsubscribe button below. In case this newsletter has been forwarded to you and you want to subscribe, please click here.


Stone Mountain Capital is a limited company (LTD) registered in England & Wales with registered number 8763463. The registered address is: 31 Compayne Gardens, London NW6 3DD, England, United Kingdom. Stone Mountain Capital LTD is registered (FRN: 729609) as Appointed Representative with the Financial Conduct Authority (‘FCA’) in the United Kingdom. Stone Mountain Capital LTD is the Distributor of foreign collective investment schemes distributed to qualified investors in Switzerland. Certain of those foreign collective investment schemes are represented by First Independent Fund Services LTD, which is authorised and regulated by the Swiss Financial Market Supervisory Authority (‘FINMA') as Swiss Representative of foreign collective investment schemes pursuant to Art 13 para 2 let. h in the Federal Act on Collective Investment Schemes (CISA). Stone Mountain Capital LTD conducts securities related activities in the U.S. pursuant to a Securities and Exchange Commission ('SEC') Rule 15a-6 Agreement with Crito Capital LLC, a U.S. SEC registered broker-dealer, and member of Financial Industry Regulatory Authority (‘FINRA’), Securities Investor Protection Corporation (‘SIPC’) and Municipal Securities Rulemaking Board (‘MSRB'). All information in this perspective including research is classified as minor acceptable non-monetary benefits ('MNMB') in accordance with article 11(5)(a) of the MiFID Delegated Directive (EU) 2017/593 and FCA COBS 2.3A.19.

Copyright © 2019 Stone Mountain Capital LTD. All rights reserved.
 
Any business communication, sent by or on behalf of Stone Mountain Capital LTD or one of its affiliated firms or other entities (together "Stone Mountain"), is confidential and may be privileged or otherwise protected. This e-mail message is for information purposes only, it is not a recommendation, advice, offer or solicitation to buy or sell a product or service nor an official confirmation of any transaction. It is directed at persons who are professionals and is not intended for retail customer use. This e-mail message and any attachments are for the sole use of the intended recipient(s). Our LTD accepts no liability for the content of this email, or for the consequences of any actions taken on the basis of the information provided, unless that information is subsequently confirmed in writing. Any views or opinions presented in this email are solely those of the author and do not necessarily represent those of the limited company. Any unauthorised review, use, disclosure or distribution is prohibited. If you are not the intended recipient, please notify the sender by reply e-mail and destroy all copies of the original message and any attachments. By replying to this e-mail, you consent to Stone Mountain monitoring the content of any e-mails you send to or receive from Stone Mountain. Stone Mountain is not liable for any opinions expressed by the sender where this is a non-business e-mail. Emails are not secure and cannot be guaranteed to be error free. Anyone who communicates with us by email is taken to accept these risks. This message is subject to our terms at our Disclaimer.
 

Comments are closed.
    ExchangeRates.org.uk


    ​Archives

    June 2025
    May 2025
    April 2025
    March 2025
    February 2025
    January 2025
    December 2024
    November 2024
    October 2024
    September 2024
    August 2024
    July 2024
    June 2024
    May 2024
    April 2024
    March 2024
    February 2024
    January 2024
    December 2023
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    April 2019
    January 2019
    November 2018
    August 2018
    May 2018
    February 2018
    December 2017
    November 2017
    October 2017
    June 2017
    March 2017
    February 2017
    January 2017
    November 2016
    October 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015

    Categories

    All
    Bitcoin
    Blockchain
    China
    Corporate
    Credit
    Cryptocurrency
    CTA
    Direct Lending
    Emerging Markets
    Equity
    ETF
    Ethereum
    Fund Of Hedge Fund
    Global Macro
    Hedge Fund
    Index
    Middle Market
    Private Debt
    Private Equity
    Rating
    Real Estate
    Risk Premia
    SME
    State Owned Enterprise
    Stocks
    UCITS
    Venture Capital
    VIX
    Volatility
    VSTOXX

    RSS Feed

PRIVACY POLICY
ANTI-BRIBERY POLICY
UK STEWARDSHIP CODE
CONTACT
ESG POLICY
DISCLAIMER
Picture

​Stone Mountain Capital LTD is authorised and regulated with FRN: 929802 by the Financial Conduct Authority (‘FCA’) in the United Kingdom. 
The website content is neither an offer to sell nor a solicitation of an offer to buy an interest in any investment or advisory service by​
Stone Mountain Capital LTD and should be read with the DISCLAIMER.
© 2025 Stone Mountain Capital LTD. All rights reserved.
  • About
    • Switzerland
    • United Arab Emirates
    • Estonia
    • Partners
    • Ventures
  • Team
    • Oliver Fochler
    • Ashvin Chotai
    • Pascal Hasler
    • Alexander Rothlin
    • Claudio Calonder
    • Joaquin Abos
    • Alliances
  • Advisory
    • Corporate Finance
    • Solutions
    • Mandates
  • Research
    • Perspective Subscription
    • News
    • Awards
  • Contact
    • Privacy Policy
    • Anti-Bribery Policy
    • UK Stewardship Code
    • ESG Policy
    • Disclaimer
  • Login