The Eurekahedge Hedge Fund Index declined -0.52 per cent in May 2022, trailing behind the S&P 500 which eked out a 0.01 per cent return over the same period.
 

The firm writes that widespread investor caution and uncertainty over both geopolitical and economic tensions continued to linger as inflation remains persistently high amid the ongoing Russia-Ukraine war and continued global supply chain disruptions.

This has fanned concerns that the Federal Reserve will be forced to tighten monetary policy more aggressively to prevent inflation from spiralling out of control and at the same time avoid pushing the economy into a recession. Market participants are expecting the Federal Reserve to hike interest rates by 50bps in its June and July meetings and then move to a more modest 25bps for the rest of 2022. Compounding matters further, the BA.4 and BA.5 Omicron subvariants which are better than previous versions of Omicron at evading the immune system’s defences are steadily gaining ground, adding more uncertainty to the future trajectory of the global coronavirus pandemic.

Over in Europe, returns were mixed among equity benchmarks in the region with the RTS Index up 11.71 per cent while the Euro Stoxx 50 and CAC 40 Index were down -0.36 per cent and -0.99 per cent respectively. The high prices for commodities, which is Russia’ key source of revenue combined with the imposition of capital controls has enabled the Russian rouble to appreciate by a further 14.29 per cent against the US dollar in May, supporting the performance of the RTS Index. Returns were negative across geographic mandates in May, except for the Latin American mandate which posted a return of 0.88 per cent while the Japanese mandate trailed behind their peers with a return of -1.50 per cent. Across strategies, the macro mandate performed the best, posting the smallest decline of -0.11 per cent while the event driven mandate trailed behind their peers with a return of -1.55 per cent.

Roughly 38.6 per cent of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in May, and 43.0 per cent of the hedge fund managers in the database were able to maintain a positive return in 2022, the firm writes.

Hedge fund managers were down 0.52 per cent in May, outperforming the tech-heavy NASDAQ by 1.53 per cent but trailed behind the S&P 500 by 0.51 per cent. Around 38.6 per cent of global hedge funds have generated positive returns in May, while around 43.0 per cent of them have maintained a double-digit performance throughout the year. On a year-to-date basis, global hedge funds were down -2.61 per cent, outperforming the S&P 500 which returned -13.30 per cent over the same period.

On an asset-weighted basis, hedge funds were down 0.35 per cent in May, as captured by the Eurekahedge Asset Weighted Index – USD, slightly outperforming its equal-weighted counterpart by 0.17 per cent. On a year-to-date basis, the Eurekahedge Asset-Weighted Index – USD was down -1.89 per cent over the first five months of the year.

The ability of large size hedge funds to diversify their assets have paid off in this challenging period as they have reported relatively smaller losses among their peers in May, with billion dollar hedge funds losing -0.45 per cent compared to the -0.50 per cent return of their medium-size counterparts. In terms of year-to-date returns, the Eurekahedge Billion Dollar Hedge Fund Index was down -0.15 per cent, outperforming their medium-size peers which posted losses of -2.49 per cent as of May 2022.

The Eurekahedge CTA/Managed Futures Hedge Fund Index was down -0.20 per cent in May, snapping its five-month winning streak. Commodity prices except for oil retreated during the month owing to the concern over an impending global recession driven by the hawkish Federal Reserve and geopolitical uncertainty. In terms of year-to-date return, CTA/managed futures hedge funds were up 8.14 per cent over the first five months of the year.

Emerging market hedge funds, as represented by the Eurekahedge Emerging Markets Hedge Fund Index were down -0.12 per cent in May, outperforming its developed market peers in North America and Europe who were down by -0.13 per cent and -1.24 per cent respectively. The positive performance of the equity market in the emerging market particularly in Asia and Latin America supported the fund manager’s performance during the month. China’s Shanghai Composite was up 4.57 per cent in May, while Brazil’s IBOVESPA was up 3.22 per cent over the same period.

The Eurekahedge North America Long Short Equities Hedge Fund Index was up 0.24 per cent in May, bringing its year-to-date return to -7.31 per cent. US equities on average ended the month flat as seen by the S&P 500 and Dow Jones, while US tech companies declined as seen by the -2.05 per cent return of the NASDAQ Composite. Selling pressure on US equity markets continued during the first half of May due to higher inflation rates in the region which have resulted in a hawkish Federal Reserve. In the second half of May, US equities recovered their losses and ended the month flat, thanks to the easing lockdowns in China and market expectations that inflation rates in the region have reached its peaked.

Fund managers focusing on cryptocurrencies as represented by the Eurekahedge Crypto-Currency Hedge Fund Index declined -22.62 per cent in May, bringing their year-to-date return to -40.14 per cent. Similar to other risk asset classes, the magnitude of market breakdown has also impacted the cryptocurrency market. Bitcoin was down -17.83 per cent in May, while Ethereum the second-largest cryptocurrency in terms of market value was much more volatile as it recorded -29.07 per cent of losses during the month. By comparison, cryptocurrency hedge funds posted a May year-to-date return of -35.52 per cent in 2018, the worst year for cryptocurrency hedge funds since the inception of the index in terms of full year returns.

SGX joins a community of exchanges that are leveraging DataBP’s platform and managed services to modernise and streamline the administration of market data. 

Tapping on DataBP’s platform and market data commercial expertise, SGX has rolled out SGX Data Direct, an SGX-branded online portal for data licensing and usage reporting powered by DataBP, marking it the first exchange in Asia to offer such a service as a direct channel for data client engagement.  

As capital markets continue to evolve and become more data-driven, the scale and complexity of data relationships are constrained due to the limitations and inefficiencies of the underlying traditional business processes. The partnership of DataBP and SGX provides the opportunity to streamline and improve the SGX data client experience. DataBP’s platform supports the rapid introduction of new products and the scalability to support the diversification of subscribers and vendor relationships.

Joyce Tan, Head of Market Data Development & Delivery at SGX, says: “Our partnership with DataBP and the inception of SGX Data Direct offers a direct online channel of engagement with our end-clients. It is developed to be a one-stop for SGX market data-related matters with customised functionalities to facilitate online data licensing, usage reporting and inventory checking process, accessible 24/7. The implementation of SGX Data Direct reiterates our continuous focus on customers and our desire to better understand the needs of the end users of our market data.”

Brandon Baker, Co-Founder at DataBP, says: “We are thrilled to partner with SGX and welcome them to our community of global exchanges that are leading the transformation of how market data is managed. Our team’s unique combination of exchange market data experience combined with our cloud-native software services capabilities has put us in high demand as exchanges continue to invest in their information businesses.”  

Ari Smukler, Head of Implementation and APAC at DataBP, says: “The SGX partnership is a huge milestone for us as we execute on our APAC expansion strategy. We are building out our team here in APAC and expanding our AWS infrastructure footprint to support further growth in the region.”

After a record-breaking first half of the year, global IPO activity has slowed down in the third quarter, driven by inflation concerns, tightening of the monetary policies by central banks, supply chain disruptions, and worries about the post-lockdown economic recovery. Although the total value of deals hit USD112.3 billion, down from USD122.3 billion in the same period a year ago, it was still the most active Q3 in recent years in Europe and the United Kingdom.

While the global IPO activity slowed down over the past few months, following a generally quieter summer period and a pause for Chinese IPOs in the US, the European market has seen a variety of businesses coming to the market across different sectors, including financials, healthcare, technology, consumer and industrials.

The Wall Street Journal and Dealogic data also showed that Europe witnessed much stronger IPO activity and bigger YoY growth than other regions. Over the past ten months, the total value of IPO deals in the European market hit USD89 billion, or 75 per cent higher than in 2019 and 2020 combined.

US companies raised USD218.2 billion in IPO deals since the beginning of the year, 101 per cent more than in the same period a year ago. The total value of deals in the Asian market jumped by 46 per cent YoY to USD132.2 billion as of last week. The Middle East and Africa also witnessed impressive growth, with the total value of IPOs soaring by 320 per cent YoY to USD12.2 billion.

Statistics show JP Morgan is the number one advisor on IPOs in Europe this year, with USD9.22 billion worth of deals year-to-date. Goldman Sachs ranked second on Europe’s IPOs bookrunner list, with USD5.86 billion worth of deals between January and October. City and Morgan Stanley follow, with USD5.56 billion and USD5.07 billion, respectively.

Although all the largest sectors in the European market saw impressive year-over-year growth, statistics show the tech industry still leads in the total value of IPO deals. Over the past ten months, European tech companies completed USD25.6 billion worth of IPOs, significantly up from USD9.3 billion in the year-ago period.

European finance companies have raised almost USD17.5 billion through initial public offerings since January, showing a massive 962 per cent increase YoY.

The healthcare sector witnessed USD8.34 billion worth of IPO deals over the past ten months, a fourfold increase compared to the same period a year ago. Utility and Energy sectors follow, with USD4.8 billion, and USD4.69 billion, respectively.

JTC will provide administration and registry services for the new vehicle. The listing of Disruptive creates a structure aimed at acquiring another company within the financial services sector throughout Western Europe and/or Northern Europe, though the potential target has not been publicly identified. It is also the first SPAC on Euronext Amsterdam to be listed and traded in sterling

SPACs are publicly traded vehicles with the sole purpose to create a merger with another publicly traded company. They have gained popularity in Europe through 2021 as a result of various regulatory changes, which have made them an attractive method for acquisitions.

James Tracey, Managing Director – JTC Guernsey, says: “We are delighted to have been part of Disruptive’s successful listing on Euronext and I’d like to personally thank my team for their hard work and dedication. With JTC’s presence across Europe, we were able to provide support in the Channel Islands and the Netherlands, based on the particular needs of our client.”

Dewi Habraken, Director – Netherlands, JTC, adds: “This listing further demonstrates that the appetite for SPACs in Europe is continuing to grow as regulators adapt to demands from investors and sponsors. Euronext is maintaining its position as the venue of choice for SPACs at the moment and we are pleased that Disruptive has recognised JTC’s extensive expertise with listings across European exchanges and domiciles.”

Edmund Truell, executive director of Disruptive and founder of private equity firm Disruptive Capital, says: “We are delighted to have worked with JTC to list Disruptive Capital Acquisition Company on Euronext Amsterdam. This marks a significant development for Disruptive Capital as we look forward to buying a large business in the European financial services sector; and benefitting from additional access to public capital markets. 

“Our team has decades of successful business acquisition and transformation experience, so it was the obvious choice to partner with JTC who share our high-levels of expertise and commitment to service delivery over multiple locations.”

JTC’s offices in the Channel Islands, London and Amsterdam have seen increased interest for SPACS listed on The International Stock Exchange (TISE), the London Stock Exchange (LSE) and Euronext respectively over the past year.

The agreement builds on many years of successful collaboration between the two companies and extends Cboe’s rights to offer options trading on MSCI global indices through to the end of 2031. Significantly, the agreement also expands Cboe’s and MSCI’s relationship, creating opportunities for the companies to work together to pursue other strategic initiatives across capital markets, and combine their complementary strengths and visions to help drive future innovation for market participants globally.

“We have valued our strong partnership with MSCI for many years and are pleased to expand our relationship through this strategic agreement,” says Ed Tilly, Chairman, President and Chief Executive Officer of Cboe Global Markets. “Cboe and MSCI share a common vision to help market participants protect capital, transfer risk and generate wealth to create a sustainable financial future. Our expanded relationship with MSCI opens up a world of opportunities for new products, services and solutions, and we look forward to working together to further serve the global investment community.”

The two companies have collaborated successfully to offer options trading on MSCI global indices for many years. Under the agreement, initially signed in 2014, Cboe will continue to have the rights in the U.S. to develop and list index options on the following six MSCI indices: the MSCI EAFE Index (MXEA), MSCI Emerging Markets Index (MXEF), MSCI All Country World Index, MSCI USA Index, MSCI World Index and the MSCI ACWI ex-USA Index.

In addition, the agreement enables Cboe to offer index options, subject to regulatory approval, on four additional MSCI ESG indices: the MSCI Emerging Markets ESG Leaders Index, MSCI EAFE ESG Leaders Index, MSCI USA ESG Leaders Index and the MSCI World ESG Leaders Index.

“This agreement represents a huge innovation for the derivative market,” says Henry Fernandez, Chairman and Chief Executive Officer of MSCI. “It will increase access to products our clients need while helping us build a stronger financial system. It also lays the groundwork for additional collaboration between MSCI and Cboe in the years ahead. We are excited to continue growing our strategic relationship.”

The largest sustainable property developer in the UK and a company with 125 years’ history of sustainably manufacturing wood products are among the latest bond issuers to be admitted to the segment.
 
TISE Sustainable was launched in July as a comprehensive and reputable enabler for increased capital allocation towards environmental, social or sustainable activities. It provides qualifying issuers and their securities with enhanced connectivity, credibility, transparency and visibility among investors with minimal administrative burden and no additional fees. 
 
Carey Olsen Corporate Finance Limited has acted as listing agent for both Canary Wharf Group Investment Holdings PLC and PCF GmbH on their respective listings on TISE and admissions to TISE Sustainable.
 
Anthony Byrne, Head of Bond Markets at TISE, says: “I am delighted to welcome both Canary Wharf Group Investment Holdings PLC and PCF GmbH to listing on TISE and admission to TISE Sustainable. The segment is Europe’s most comprehensive sustainable market segment, offering issuers enhanced connectivity, credibility, transparency and visibility among investors. It is hugely pleasing to see a growing number of bond issuers availing of the segment through alignment with recognised green and sustainable finance frameworks, such as those from the International Capital Market Association (ICMA).”
 
Canary Wharf Group Investment Holdings PLC is part of the Canary Wharf Group (CWG), which is the largest sustainable developer in the UK with over 11 million square feet of sustainable certified buildings. CWG is the developer of the largest regeneration project in Europe, that as a commercial and residential property company is responsible for owning, managing and developing the regeneration of 128 acres of the once-derelict Docklands district of East London and turning it into a sustainable 24/7 community.
 
Canary Wharf Group Investment Holdings PLC has three bonds listed on TISE which are aligned with the ICMA Green Bond Principles.
 
PCF GmbH (Pfleiderer) is headquartered in Germany and a leading manufacturer of premium engineered wood products, laminates and resins. It was founded in 1984 by Gustav Adolf Pfleiderer and since its beginnings more than 125 years ago, Pfleiderer has attached great importance to sustainable management and development, from ecological and economic as well as social points of view. 

The new features of the enhanced MOC facility are aimed at providing clients with an improved trading experience, and delivering benefits to the broader Canadian capital markets ecosystem with increased efficiency in determining end-of-day valuations for eligible Toronto Stock Exchange (TSX) and select TSX Venture Exchange (TSXV) listed issues.
 
“We are proud to introduce the new and improved TSX MOC, an adaptive response to industry needs and a significant step forward in ensuring Canada’s markets remain transparent, liquid and globally competitive,” says Rizwan Awan, President, Equities Trading and Head of TMX Markets, Products & Services, TMX Group. “The enhanced, modernised TSX MOC model is the culmination of two years of dedicated work by our team in close collaboration with a wide range of participants across our client community, and we are confident that the new features will reap wide-reaching and long-lasting benefits.”
 
Introduced in 2004, the TSX MOC facility operates as an electronic call market, providing equal access and opportunity for investors looking to source liquidity and participate in trades at the closing price. TSX MOC also plays a vital role in Canada’s markets by providing efficiency and accuracy in setting the TSX Closing Price and TSXV Closing Price closing price for eligible listed issues.
 
The new TSX MOC model introduces three high level changes, each designed to address issues of transparency, alignment with global markets, and consistency of execution:
 
Enhanced transparency by increasing depth of detailed information and frequency of communication regarding Imbalances.

Newly defined MOC Imbalance market state to align with global models.

Additional MOC Freeze market state to mitigate volatility and help prevent unexpected price and imbalance movements.

GPW has reviewed the solutions available on the market and decided to develop a proprietary solution based on state-of-the-art technology and the competences and experience of its staff. The end result is a product which supports a very flexible setup of indices based on traded instruments. With an open input interface, the system can download data from multiple sources. The modern architecture of the Index Calculator ensures scalability of performance and supports parallel multiple index calculations. The functionalities of the solution meet the regulatory requirements under the Benchmark Regulation (BMR).

“We have completed one of the projects under the Strategy GPW2022 which supports our technology arm by developing solutions for our own needs and for commercialisation. Implemented by GPW Benchmark, the Index Calculator interacts with the legacy trading system but has been designed as a module of a new trading system which GPW is developing. I am proud that this critical component of a trading system has been implemented seamlessly in its environment, a great achievement of the project team including GPW and GPW Benchmark staff as well as our technology partner,” says Dariusz Kułakowski, GPW Management Board Member for IT and Technology.

The index and benchmark provider GPW Benchmark has been using the new Index Calculator since 24 September 2021. “The new calculator of stock and bond indices delivers state-of-the-art technology combined with improved performance and allows GPW Benchmark to expand its product range. We have ambitious plans of co-operation with the financial market, of which the new tool is an important factor,” says Zbigniew Minda, President of GPW Benchmark.

GPW Benchmark is the first user of the new Index Calculator. “The Warsaw Stock Exchange is planning to offer the new product to foreign customers. The project will be commercialised by GPW Tech. The new Index Calculator is yet another tool in the family of modules of the new trading system. Similar to TCA Tools and Market Surveillance, the new product can be sold on a stand-alone basis. Thanks to high computing power, it will successfully compete with similar solutions offered by the most technologically advanced exchanges,” says Witold Wiliński, President of GPW Tech.
 

Appetite for Japanese equities appears to be turning a corner after years of investors underweighting the region, with the country’s rapid roll-out of Covid-19 vaccinations and hopes over its upcoming election driving share prices higher in September.

Fund managers boosted their allocations to Japanese equities by an average of 11 percentage points in September to a net 1 per cent underweight, according to a monthly Bank of America survey. 

The newly-elected Liberal Democratic Party (LDP) leader, Fumio Kishida, is expected to become Japan’s next Prime Minister, after current Prime Minister Yoshihide Suga ends his term later this year.

Japanese stocks leapt in mid-September after Prime Minister Suga announced that he would not stand in the upcoming election. 

Both the Nikkei 225 and the broader Topix equity indices hit highs not seen in more than 30 years, since the collapse of Japan’s asset price in 1991.

“From our perspective, the markets are taking it as anyone but Suga is good news,” said Daniel Hurley, senior portfolio analyst and member of the Japan Equity investment team at T Rowe Price, speaking before the outcome of the LDP’s leadership race was decided.

“I think the reason why markets have moved so much in the past couple of weeks since Suga announced he wouldn’t be standing for the LDP leadership, is the fact that Suga was struggling in the polls,” says Hurley. 

Prime Minister Yoshihide Suga suffered in approval ratings as voters complained about a lack of personal charisma, as well as his government’s slow response to coronavirus and the unpopular decision to hold the Olympic Games. 

Hurley continues: “Now the LDP will win, as expected before, but their majority will probably be even stronger than if Suga had been the leader standing for the election.” 

A strongly-supported new leader will be more likely to continue with structural reforms that begun under former Prime Minister Shinzo Abe, and potentially announce further fiscal stimulus, according to Hurley.

The frontrunner for next Prime Minister of Japan, Fumio Kishida, has said that Japan must keep expansionary fiscal and monetary policies in place, and pass “tens of trillions of yen” in economic stimulus to combat the coronavirus.

A Japanese election could be called as early as the end of October or early November, according to Hurley.

“They’ll have to call an election by the end of November,” says Hurley. “But there’s speculation that because the new leader will have a honeymoon period, they may even call the election earlier than that to take advantage of strong polling numbers.”

Japanese stocks were already gaining momentum before Suga’s departure was announced, since major headwinds including the Tokyo Olympic Games and the slow start to Japan’s vaccination drive were receding from view, according to Hurley.

The Olympics weighed on markets since it led the government to increase coronavirus restrictions in the early part of the year, at the same time as other global economies were opening up. 

Although it was later than other major economies to begin vaccinating its population, Japan has been administering jabs at a startling rate of more than one million per day in September.

“Even before Suga announced he wasn’t standing, markets had really started to appreciate just how quickly the vaccine rollout was going ahead,” says Hurley. 

“We think that this is going to see Japan meaningfully catch up in terms of market performance, as the market appreciates just how quickly this rollout has been going ahead,” says Hurley, noting that Japan’s vaccination programme overtook the US in September.

Foreign investors are now lessening their underweight positions toward Japanese markets for the first time in years, notes Hurley. Major asset managers including JPMorgan, Baillie Gifford, and BNP Paribas Asset Management are among the investors that have become more positive on Japan ahead of the election.

He explains: “The longer-term aversion to Japan for foreign investors, and really their frustration there has been on the corporate governance side of things.”

Japan’s corporate governance code was revised earlier this year to carry on reforms promised by former PM Abe, with companies urged to hire independent board directors, improve gender and ethnic diversity, and improve climate risk disclosure.

There has already been a “massive improvement” in corporate governance standards over the last 15 years, with many more companies hiring independent board members.

Hurley sees the potential for foreign investors adopting higher long-term allocations to Japanese markets as corporate governance improves.

T Rowe Price is voting against boards with no female representation in Japan, and engaging with companies to improve their ESG disclosures.

Nevertheless, Hurley says it will take many years for reforms to bed in due to Japan’s conservative culture.

“This is definitely a trend we’re thinking about as an opportunity over the next three, five, even 10 years, rather than something that investors should look out immediately.”

He says an “interesting point” has been reached with activist hedge funds successfully targeting Japanese companies, which he believes will continue to grow. 

“They had always targeted Japan in the past, but now where they have independent board members, they can lobby and vote against them,” says Hurley.

Last year, SoftBank announced the biggest share buyback in corporate Japan’s history, shortly after renowned activist outfit Elliott Management Corp took a USD3 billion stake in the company. 

Hurley notes that improvements to corporate governance in the country is making it easier for investors to engage with boards to change the way capital is allocated, including proposing share buybacks to improve returns and attract investors.

“One of the things that has frustrated foreign investors for some time in Japan has been the poor returns you get from the companies, and how they prefer to almost hoard cash,” says Hurley.

“Some companies that we see in Japan have got 40 per cent of their balance sheet just sitting in cash, idly earning 0 per cent at the Bank of Japan.”

In addition to corporate governance standards improving, Japan is still cheap in Price/Earnings ratios, compared to Europe and the US. 

Hurley sees earnings as likely to pick up since Japan is an incredibly open and cyclical market, which will likely benefit as the global economy rebounds.

Suga’s push to encourage digital innovation in Japan has led to some interesting investment opportunities, with T Rowe Price currently exploring the digital wealth management sector.

A new campaign to promote better understanding of modern market making, what it does and its benefits for wider society, has been launched today. 

#WeAreMarketMakers is being run by FIA EPTA, the European industry body for independent market making companies, as part of its 10th Anniversary activities. The project is not only supported by FIA EPTA’s 30 member firms, but also by others in the markets community that work directly with and alongside the industry.
 
The campaign seeks to help inform and educate stakeholders on the important role that market makers play: from providing liquidity to the global financial markets, to supporting citizens’ pension pots.
 
It also aims to debunk some of the myths surrounding the industry, and put forward the people and innovators behind the industry.  
 
The #WeAreMarketMakers campaign will be led through an integrated communications campaign and built around a series of independently-produced thought leadership reports looking into liquidity provision, innovation and sustainable finance.
 
The first report – Liquidity in the Time of Covid — is being launched today with a panel discussion at the International Derivatives Expo (IDX) conference in London. It focuses on the impact of the pandemic on liquidity provision and how market makers played a vital role supporting asset managers.  
 
The campaign will also create a new microsite about the sector, explaining what it does and its contribution, with news articles, blogs and videos as well as data and facts about the industry. The campaign website goes into detail about how market makers benefit everyone in society, from pensioners, farmers, businesses and even governments.
 
Mark Spanbroek, Chairman of FIA EPTA, says: “Our industry can sometimes be hard to grasp and our presence and impact is not always obvious – but we are always present in the markets and have been fundamental to the resilience of European financial markets, including throughout the Covid-19 pandemic.
 
“We are excited to bring our ten-year run of engagement with stakeholders to a new level with this campaign, and are keen to reach new audiences to make them aware of the tremendous contribution of market makers to well-functioning markets that benefit everyone in society.”