BNY Mellon Survey: HFs and SWFs Exert Strong Appeal

(October 26, 2010) — Companies worldwide are looking to lure greater investment from hedge funds and sovereign wealth funds while increasingly contemplating secondary stock listings in emerging markets, a new Bank of New York Mellon survey reveals.

“This survey…has some interesting stats on how companies worldwide meet quite regularly with hedge funds and sovereign wealth funds, treating them now much like any other investor,” BNY Mellon spokesman Joe Ailinger told aiCIO. “We were also surprised that nearly a quarter of firms were considering a secondary stock listing in an emerging market, especially greater in China.”

According to the annual Global Trends in Investor Relations survey of nearly 400 companies from 47 countries, while 93% of companies met with hedge funds to discuss possible investment this year, compared to 89% in 2009, 47% met with sovereign wealth funds. Twenty-two percent are considering a secondary stock listing in high-growth markets, such as China and Hong Kong, to attract growing capital in those regions. Additionally, respondents revealed that major regions for investor opportunities over the next three years are North America (77%), Europe (70%) and Asia (48%).

Separately, Credit Suisse Group said earlier this week that hedge funds have fully recovered their peak in September, when the DJCS Hedge Fund Index was 1.2% over its previous peak in June 2008. During the financial crisis, the index, which measures overall hedge fund performance, fell as much as 19.5% from its the previous peak.

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“The index showed that most funds have regained their high water mark on most of their assets. It is good news to investors who haven’t redeemed their assets,” Oliver Schupp, President of Credit Suisse Index Co., told the Dow Jones Newswires. “Compared to equities, hedge funds fared fairly well over the past two years.”

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Seeking Liquidity, Harvard Ups Cash Allocation to $1 Billion

The oldest and richest college in the US has released its annual report saying that following the financial crisis that left endowments around the country struggling to run their campuses, it has boosted its holdings of cash, US Treasuries, and other easy-to-sell assets.

(October 26, 2010) — After being pummeled by the global financial crisis that left endowments around the country short of money, Harvard, like other wealthy universities, has increased its cash holdings and aims to “maintain or further increase” cash holdings this fiscal year, it said in its annual report, adding that it had a combined $4 billion of so-called internal liquidity as of June 30.

As part of the school’s strategic shift to form a more liquid portfolio, the Cambridge, Massachusetts-based university revealed it has more than tripled its amount of cash, US Treasuries, and other liquid assets to $1 billion by the end of fiscal year 2010 from $300 million in June 2008 while decreasing the amount of operating funds in its endowment, according to the university’s annual report. From December 2008 to November 2009, Harvard, Yale University, and 13 other wealthy universities that rely heavily on endowment earnings to run their campuses sold a combined $7.2 billion of taxable bonds as they ran low on cash.

Last year, Harvard lost $1.8 billion of its operating funds because much of the money was invested alongside its endowment, which dropped 27.3% and led to layoffs, salary freezes and a delay in construction projects. This year, however, the school’s investments rose 11% for its fiscal year ended June 30, outpacing its own benchmark.

“Significant progress was made in transitioning the investment profile of the university’s pooled operating funds to be more readily available and less susceptible to illiquidity and market fluctuations,” university officials said in the report. University officials added that while Harvard has made progress in responding to a tough economic environment, the university “must continue to be vigilant in managing our finances in order to ensure that Harvard can fulfill its mission even with the continued uncertainty that surrounds us,” they wrote.

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Additionally, the university reiterated its plan to delay its ambitious Allston expansion project as a result of “reduced financial resources.” According to the report, plans for development of the Allston campus will move ahead “as resources allow.”

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742