Category: Corporate

Alternative Markets Outlook H2 2019 and Macro Outlook August 2019

13/8/2019

Alternative Markets Outlook H2 2019

The asset management industry experienced significant declines in 2018. Alternative assets achieved the best performance among non traditional long asset classes. The popularity of actively managed assets is decreasing for the last 15 years, while passive solutions and alternatives are gaining more attention, which is likely to continue. It is expected that the industry will experience more volatile markets, increased competition and more economic uncertainty. Especially the uncertainties will increase, for example how the US-Chinese trade war will develop, with the background of new elections in the US in 2020. Europe's uncertainty will peak on how Brexit is executed at the end of October.

Hedge Funds

Hedge funds remain strong in July after a very profitable H1 2019 and reached a new record level of market capitalization of $3.273tn. In July, hedge funds yielded positive results again. The aggregated average performance of hedge in the current year is at 7.67%, which is likely to continue. Figure 1 shows the performance of several hedge fund strategies. Noteworthy is that none of them generated negative return. The interest rate cut of the FED is likely to increase the attractiveness of hedge funds further.

Investors are currently moving cash from equity strategies to lower beta strategies, as equity markets have reached all-time highs. For H1 2019, targeted strategies were mostly credit multi-strategy and relative value arbitrage strategies. However, this shifted to macro, CTA, currency and commodity funds in July 2019 and is likely to continue during H2 2019. Despite the trade war between the US and China, the allocated capital from hedge funds in China increased further. This conflict is likely to shape the general performance of financial markets, especially in the hedge fund industry. Due to current and expected interest rate decisions from most central banks as well as the volatility of currencies, hedge funds are looking for safe havens. Gold is experiencing an increased demand, causing the price per ounce to rise to the highest level since 2016 and $1600 or even $2000 is forecasted from major US investment banks.

Figure 1: Performance of Different Hedge Fund Strategies from June 2018 to June 2019: August 2019, Source: FundMap

Alternative Markets Update H1 2019

30/7/2019

Alternative Markets Update H1 2019

Hedge Funds
After the difficulties for hedge funds in 2018, 2019 started strong, despite the current uncertainties, such as the Brexit, the European elections and the trade war. Only in May, there were some difficulties. This short downturn was offset and more than compensated in June, which yielded extraordinary results. Our best performing strategy was the cryptocurrency strategy, followed by US equity disruptive technology and US equity high conviction. The best performing asset class was tactical trading, which achieved a 30.78% YTD, as shown in figure 1. Furthermore, all strategies had positive return in H1 2019.

Figure 1: Overview of Performance of Different Hedge Fund Strategies: June 2019, Source: Stone Mountain Capital Research

Alternative Markets Update - Macro And Political Outlook June 2019

13/6/2019

Alternative Markets Update June 2019

June started in a more dynamic fashion for hedges funds are already recouped May’s losses. The anticipation of an interest rate cut this year as a result of Fed’s announcements resulted to a strong bounce back for equity markets. Equity hedge strategies profited the most during the first weeks of June, a month that so far is characterised by the trade war discussions and further tariff plans from US. Macro and CTA strategies had their bets right so far this month and they are waiting to capitalise on future volatility events. Bitcoin’s momentum slowed down in June and its price has receded from $8,740 to $7,900, reaching a market cap of $140bn. Ethereum had also a

slightly negative month so far and is keep following the same pattern as bitcoin.

Macro and Political Outlook June 2019 MacroEagle

Source: MacroEagle

Alternative Markets Update Q1 2019 - Macro and Political Outlook April 2019

16/4/2019

Alternative Markets Update Q1 2019

After a rather disappointing last year, hedge funds bounced back and are enjoying their strongest quarter since 2006 according to data from HFR, with macro and CTA strategies leading the race so far with gains driven from their fixed income exposure. Private equity is also enjoying a good first quarter with growth equity strategies raising almost $25bn and the number of deals has also increased compared to the last months of last year. Private debt fundraising on the other hand has slowed down, with larger firms claiming the largest part of the pie and creating a rather concentrated industry with high level of dry powder and uncertainty due

to geopolitical reasons. Bitcoin and Ethereum enjoyed a strong rally during the first quarter of 2019, surpassing $5,000 and $160 respectively.

Macro and Political Outlook April 2019 MacroEagle

Source: MacroEagle

European Direct Lending III: Opportunities In The Lower Middle Market

6/11/2018

Oliver Fochler
Managing Partner, CEO
Tel.: +44 7922 436360

Alexandros Kyparissis
Analyst Hedge Funds
Tel.: +44 7843 144007

stone_mountain_capital_research_perspective_vol.94_-_november_2018.pdf
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STONE MOUNTAIN CAPITAL RESEARCH PERSPECTIVE VOL.94

Lending has always been the core banking business over centuries until the great financial crisis hit in 2008, which gave birth to a new asset class: private debt. For years, private markets were dominated by funds focusing on equity and banks on debt. The regulations that came into force in the aftermath of 2008 financial crisis created a funding gap for a specific market segment. Large corporates can finance themselves via debt and equity public issuance or bank lending, but funding middle market and SME corporates remains a challenge. The rise of debt funds together with fintech firms’ efforts to revolutionise alternative credit are shaping the current private debt environment, which is still enjoying a strong fundraising momentum. The 2023 forecast shows an increase for private debt AuM to $1.4 trillion, while assets have doubled since 2008.

Figure 1. Private Debt AuM, Forecast 2023, Source: Preqin

Figure 2. Private Debt AuM, 2013-3Q18, Source: Preqin

European Direct Lending: Opportunities in the Lower Middle Market

11/10/2017

Oliver Fochler
Managing Partner, CEO
Tel.: +44 7922 436360

Alexandros Kyparissis
Analyst Hedge Funds
Tel.: +44 7843 144007

stone_mountain_capital_research_perspective_vol.63_-_october_2017.pdf
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STONE MOUNTAIN CAPITAL RESEARCH PERSPECTIVE VOL.63

The current market environment is characterised by high valuations in equities and low yields in traditional fixed income markets, urging investors to seek for alternative, diversified and stronger sources of return. Private debt is on its way to becoming an established asset class and falls under fixed income and private equity allocations of institutional investors. There is a broad set of opportunities within the private debt spectrum that spans from investment grade assets (IG CLOs, real assets and real estate senior debt) by lending across capital structure in mezzanine, to equity and first-loss like assets (distressed debt, CLO equity/warehousing/risk retention), depending on the risk-return profile of the institution. Navigating from the investment grade to high yield strategies (direct lending, capital relief trades, distressed debt and special situations) investors identify diversified sources of yield generated from illiquidity, complexity and regulatory premia. The $600bn private debt industry is set to exceed $1 trillion according to a research paper from the Alternative Credit Council.

Figure 1. Industry AUM and breakdown of committed capital and dry powder, Source: Preqin, ACC research

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