Hedgebay – in the event you haven’t heard of it - does something rather interesting: it provides a secondary market for investors’ stakes in hedge funds.
They released figures about the Q1 secondary hedge fund market yesterday:
…despite a 20% year over year increase in trading of hedge fund assets through March 31, not one trade occurred at, or above, NAV.
This compares with over 92% of trades occurring at NAV, or higher, in 2003, a massive decline in just five years.
Of course, the Hedgebay market is a rather illiquid OTC affair, but it’s still a good anecdotal indicator of sentiment (Hedgebay say that as at February, the market clocked in at around $1bn in size). And per a press release from co-founder Elias Tueta yesterday:
the real issue in terms of demand is not the availability of cash, but rather the lack of conviction investors have about the state of the markets… Investors are trying to sort out which strategies will succeed in the short to medium term and to anticipate any liabilities – either in the form of further redemptions or possible capital calls from private equity commitments. Given the current level of volatility, these are incredibly difficult calls to make.
This in particular caught our eye:
There have been no fire sales yet which leads me to believe that there will be a new low at some point in the future. A bounce in the market, like the one we experienced in March, might be a golden opportunity to monetise positions. Investors who share this expectation should have limited sensitivity to pricing, as the pricing environment is likely to get worse before it gets better.