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Global Hedge Fund Industry Hits $3.2tr

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Forex Weekly Outlook August 15 - 19
  • Global Hedge Fund Industry Hits $3.2tr

A survey conducted by the International Organisation of Securities Commissions (IOSCO) has indicated that the global assets under management (AUM) of hedge funds have increased over the past two years by 24 per cent to $3.2 trillion.

IOSCO is global body of securities regulators and its members regulate more than 95 per cent of the world’s securities markets in more than 115 jurisdictions. Nigeria is a member of both the board of IOSCO and its influential Committee on Retail Investors, otherwise known as Committee 8

The board of IOSCO published the Report on the Fourth IOSCO Hedge Fund Survey, which provides regulators with new insights into the global hedge fund industry and the potential systemic risks this industry may pose to the international financial system.

IOSCO´s biannual survey has become an important resource for regulators, given the lack of public and global data on hedge fund activities.

The survey facilitates the regular collection and analysis of hedge fund data, enabling regulators to share information and observe trends regarding trading activities, leverage, liquidity management, markets and funding in the global hedge fund sector.

The report explains the results of the fourth IOSCO survey and provides an overview of the hedge fund industry based on data as at September 30, 2016. Since the first survey was conducted in 2010, data collection has expanded due to enhanced regulatory reporting regimes in some jurisdictions and fewer legal constraints around the use and sharing of data.

IOSCO however noted that while the increase to $3.2 trillion may reflect a combination of more widespread reporting across jurisdictions, market performance, and net fund subscriptions, it is not conclusive from the data.

The latest survey also indicated that the Cayman Islands continues to be the fund domicile of choice, making up 53 per cent of the global total by net asset value, largely unchanged from previous years.

According to the data from the Survey, equity long and short was the most widely used investment strategy, followed by global macro and fixed income arbitrage.

Also, gross leverage of the hedge funds in the survey was 7.1 times of net asset value, which includes the notional values of interest rate and foreign exchange derivative contracts. Removing notional values of interest rate and foreign exchange derivatives contracts reduce the gross leverage was 3.1 times and net leverage was 1.1 times.

The report indicated that at an aggregate level, there is a considerable liquidity buffer, suggesting that in normal market conditions, hedge funds should be able to meet investor redemptions.

As of the measurement date, 3.8 per cent of hedge fund assets had constrained redemptions through the use of liquidity management tools, such as gates, suspensions, or side pockets.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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