The Russian Hedge Fund Universe data as of December 31, 2016 - - PowerPoint PPT Presentation

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The Russian Hedge Fund Universe data as of December 31, 2016 - - PowerPoint PPT Presentation

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The Russian Hedge Fund Universe data as of December 31, 2016 [presentation dated May 15, 2017] Michael Boboshko Chairman, Hedge Fund Committee National Alternative Investment Management Association BUT FIRST Worldwide Fund Assets Under

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The Russian Hedge Fund Universe

data as of December 31, 2016

[presentation dated May 15, 2017]

Michael Boboshko

Chairman, Hedge Fund Committee National Alternative Investment Management Association

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…BUT FIRST…Worldwide Fund Assets Under Management: $60-70 tn

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Michael Boboshko Independent Consultant

Traditional Investments $45-50 tn

Alternative Investments $15-20 tn

Hedge Funds

Russian Hedge Funds

Sources: HFR, PreQuin, Bloomberg, ETFGI, ICI, NAIMA

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…What is a Traditional Investment Fund?

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Michael Boboshko Independent Consultant

  • “On-Shore”
  • Regulated
  • Accessible to Retail Investors – the most vulnerable
  • Highly Liquid – daily liquidity
  • Conservative – strict rules on diversification; no leverage
  • No Incentive Compensation – only management fee
  • Traditional Asset Classes/Strategies
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…What is an Alternative Investment Fund?

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Michael Boboshko Independent Consultant

  • “Off-Shore” – often zero tax jurisdictions
  • Usually Un-regulated – sometimes in-house administration
  • Strictly for “Qualified Investors”
  • Limited Liquidity – HF monthly, PE long-term “lock up”
  • More Aggressive/Risky – leverage, derivatives, concentration
  • Incentive Compensation – performance fee (“Carry”)
  • Alternative Asset Classes/Strategies
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…The Alternative Investment Fund Universe: $15 tn

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Michael Boboshko Independent Consultant

Alternative Investment Funds Private Equity Funds 2

(Illiquid, Private Investments)

Hedge Funds 1

(Liquid, Public Investments)

Equity Hedge Event Driven Relative Value Private Equity

Early Stage Late Stage Pre-IPO Fund of Funds

Venture Capital

Angel Stage Early Stage Late Stage Fund of Funds

Real Estate

Early Stage Late Stage Pre-IPO Fund of Funds

1 Invested cash mainly gets exchanged in the secondary market; but hedge funds often participate in IPOs 2 Invested cash mainly goes to the investee companies; but sometimes PE/VC/RE funds also make secondary market purchases

About $4 tn About $11 tn

Macro

Sources: HFR, PreQuin, Bloomberg, NAIMA

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…What is a Hedge Fund?

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Michael Boboshko Independent Consultant

  • Usually Un-Regulated or Lightly Regulated
  • Liquid Portfolio – trade in listed securities & derivatives
  • Semi-Liquid for Investors – usually Monthly NAV cycle
  • Absolute Return – can make money in all market cycles
  • DECORROLATED returns!
  • Lower Volatility – hedging & shorting
  • Leverage – often very high leverage; algorithmic strategies
  • Incentive Compensation
  • 2% management fee (market is falling)
  • 20% performance fee (market is more-or-less stable)

…but usually over a certain “hurdle rate”

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…Hedge Fund vs. Mutual Fund vs. ETF

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Michael Boboshko Independent Consultant

20 40 60 80 100 ETFs Mutual Funds Hedge Funds Brains Alpha/SHARP Costs/Fees

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… The Global Hedge Fund Industry

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Michael Boboshko Independent Consultant

  • 30,00%
  • 20,00%
  • 10,00%

0,00% 10,00% 20,00% 30,00% 40,00% '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Excess Return (Return over Volatility) Gross Return The HFRI Fund Weighted Composite Index 25-Year Annualized Return: 9.3% 25-Year Annualized Volatility: 6.6% 25-Year Excess Return: 2.7% [SHARP: 1.4x] The S&P500 Index 10-Year Annualized Return: 4.7% 10-Year Annualized Volatility: 15.3% 10-Year Excess Return: -10,6% [SHARP: 0.3x] The RTS Index 10-Year Annualized Return: -5% 10-Year Annualized Volatility: 35.0% 10-Year Excess Return: -40%

Sources: HFR, MICEX, NAIMA

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…What is a Russian Hedge Fund?

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Michael Boboshko Independent Consultant

  • What is meant by “Russian”?
  • Local Russian Manager/Advisor (at least in spirit)
  • At least some minor business presence in Russia
  • Not necessarily a Russia-focused investment strategy
  • What is meant by “hedge fund”?
  • Broad definition, not narrow definition
  • Alternative investment fund investing in traded instruments
  • Not a PE/VC/RE fund

– Note: most of the funds in the universe remain “long-only” by nature and thus do not attempt to reduce volatility (“risk”). – Note: the source for almost all of the data to follow is the Investment Managers / Investment Advisors themselves; some data is from independent sources such as Bloomberg and general internet search

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…Historical Growth Trend in Funds…

[Note: funds counted below only those with available data]

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Michael Boboshko Independent Consultant 13 14 18 19 25 38 54 64 68 78 82 95 96 92 77 64 65 105 20 40 60 80 100 120 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Closed

2016 finally saw a modest trend reversal, with

  • ne more new fund launching than funds closing
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…By Core Geographic Investment Focus…

[Note: % in brackets represents whole history, including closed funds]

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Michael Boboshko Independent Consultant

71% 29% Russia/CIS (59%) Non-Russia/CIS (41%)

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…By Core Asset Class…

[Note: % in brackets represents whole history, including closed funds]

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Michael Boboshko Independent Consultant

50% 19% 14% 11% 6% Equity (53%) Multi-Asset Class (21%) Derivatives (7%) Fixed-Income (12%) Other Asset Classes (7%)

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…By Size of Fund (NAV)…

[Note: total estimated size of the universe: $4.5 – $5.0 bn]

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Michael Boboshko Independent Consultant

39% 37% 5% 14% 5% <$10 mn $10-49 mn $50-99 mn $100-499 mn $500 mn+

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…By Length of Track Record…

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Michael Boboshko Independent Consultant

56% 21% 10% 13% <5 years (56%) 5-10 years (28%) 10-15 years (8%) 15+ years (8%)

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…By Jurisdiction of Incorporation…

[Note: % in brackets represents whole history, including closed funds]

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Michael Boboshko Independent Consultant

74% 10% 6% 10% Cayman (68%) BVI (9%) Luxembourg (4%) Other (11%)

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…By Selection NAV Cycle…

[Note: % in brackets represents whole history, including closed funds]

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Michael Boboshko Independent Consultant

76% 16% 5% 3% Monthly (81%) Weekly (9%) Quarterly (7%) Others (3%)

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…By Fund Fee Structure…

[Note: traditional “2%/20%” model also under pressure in Russia]

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Michael Boboshko Independent Consultant

Low High Average Management Fee 0,5% 2,5% 1,6% Performance Fee 0,0% 50,0% 17,2% Hurdle Rate * 0,0% 20,0% 2,8% * also: FedFunds; US$LIBOR; US$LIBOR+50bp; RTS Index

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…2016 Performance…A Very Good Year!

[hedge funds of all geographic focuses and all asset classes]

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Michael Boboshko Independent Consultant 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0%

  • 80,0%
  • 60,0%
  • 40,0%
  • 20,0%

0,0% 20,0% 40,0% 60,0% 80,0% 100,0% 120,0% 140,0%

2016 Performance (X) vs. Volatility (Y)

  • Avg. Return: +24%
  • Avg. VOL: 14%

HFRI-FWCI: +5.5%% RTSI: +52%

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…Historical Performance…

[hedge funds of all geographic focuses and all asset classes]

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Michael Boboshko Independent Consultant 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0%

  • 30,0%
  • 20,0%
  • 10,0%

0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0%

Historical Performance (X) vs. Volatility (Y)

  • Avg. Return: +6%
  • Avg. VOL: 21%
  • Avg. Track: (years) 6.75