Alternative UCITS Funds Report Negative Performance
Tuesday, October 11, 2011

The UCITS Alternative Index Global, leading benchmark for UCITS III hedge funds, fell in September and is down almost 4% for the year so far.

The Swiss-based tracker reported on October 6 that the UCITS Alternative Index Global ended September down by 1.33% bringing its year to date performance to -3.85%.

The Index tracks the performance of all UCITS III hedge funds and funds of hedge funds. As of August 31, the UCITS Alternative Index database was composed of more than 778 UCITS hedge funds and funds of hedge funds totaling EUR121bn of assets under management.

The Fund of Funds Index was down 0.84% in September, and has lost 4.08% this year. Indeed, in September, all strategies were down. As in August, Emerging Markets was the worst performing strategy, down -6.67%, bringing its year-to-date performance to -11.69%.

On a year-to-date basis, all strategies are negative except for Commodities, which is only just in positive territory (up 0.10%). The Emerging Markets Index is the worst year-to-date performer, followed by the Long/Short Equity Index (down 5.42%) and by the FX Index (down 3.75%).

The Blue Chip Index was down -1.47% in September, and was down -0.73% for the first week of October. In the year to October 5 it is down by 5.07%.

Undertakings for Collective Investment in Transferable Securities, or UCITS, are formed under a set of EU directives that allow investment funds to distribute throughout the EU on the basis of a single authorization from one member state; UCITS III is the latest iteration of these directives.

Despite the focus on EU investors, UCITS III-compliant offerings are not limited to EU-located or domiciled hedge fund firms; in fact, firms across all regions have created investment vehicles which are compliant with the UCITS III standards. In some cases, firms are receiving UCITS III approval for existing fund vehicles, while in other cases, firms are launching new products which conform to UCITS III guidelines.

However, a survey report released on June 6 by RBC Dexia and KPMG challenged the notion that onshore domiciles could rival the supremacy of the Cayman Islands amongst hedge fund managers.

Only a quarter (24%) of hedge fund managers who responded to the survey said that they had already brought offshore funds onshore. Of those, more than half (55%) said they opted for co-domiciliation by creating onshore clone funds to complement their existing Cayman or other offshore offerings. Less than 5% of those with onshore funds said they had decided to transfer the domicile of their funds to the EU outright. The trend for hedge funds to create more EU regulated funds seems set to continue however, with 27% of respondents stating that they are considering doing so.