And now for your weekly dose of optimism. Three-quarters of roughly 1,000 managers surveyed by Alpha Search Partners, an executive search firm, believe 2009 presents “the greatest investment opportunities of our lifetime.”
According to a report by FIN Alternatives, many hedge fund managers are holding up to 50% of their assets in cash, and expect to reallocate their investments away from equity long/short and event-driven strategies to investments in health care, energy and industrial sectors in 2009. They see these as the best-positioned sectors for growth in the current financial storm.
More than half of respondents (58%) thought that hedge fund redemptions will continue through at least the first half of 2009, but may stabilize and decline towards the end of the year.
As for hedge fund jobs, the Alpha Search survey reveals that nearly 36% of respondents planned to reduce staff or delay hiring, at least until the second quarter of 2009. Roughly one quarter plan to fill in the gaps in staffing by using consultants or contract employees.
While most hedge funds and fund of hedge funds lost money in 2008, one strategy stood out on the positive side. Managed futures gained 13.9% in 2008, its best annual performance since 1990, according to a report by HedgeFund Review using data from the BarclayHedge CTA Index.
The term “managed futures” refers to a 30-year-old industry made up of professional money managers who are known as “commodity trading advisors” (CTAs), according to the website, Investopedia.
CTAs often manage their clients’ assets using a proprietary trading system. This may involve going long or short in futures contracts in areas such as metals (gold, silver), grains (soybeans, corn, wheat), equity indexes (S&P futures, Dow futures, NASDAQ 100 futures), soft commodities (cotton, cocoa, coffee, sugar) as well as foreign currency and U.S government bond futures. Money invested in managed futures has more than doubled in the past few years and is expected to grow even more if hedge fund returns stay flat and stocks underperform.
Many of the funds tracked by the Barclay CTA Index use trend-following strategies and go long if prices are going up and short if prices are falling. Another index, the Barclay Diversified Traders Index, which measures an equal weighting of managed programs trading in a diversified portfolio, gained nearly 27% last year. The results indicate that there clearly are big opportunities for hedge fund managers even in these challenging economic times.
Global fund managers surveyed by consulting firm Watson Wyatt are optimistic that markets in many regions will begin to recover later this year.
The Watson Wyatt survey polled fund managers who collectively manage more than US$10 trillion in assets. Among the findings, published in New Straits Times, indicate that fund managers see a long recovery ahead, with some markets, namely public equities, investment grade bonds, high yield bonds and emerging markets picking up sooner than hedge funds, government bonds and real estate. Their outlook was generally neutral on private equity and currencies.
No surprise that they expect to see their institutional clients opting for more conservative strategies and greater risk management. Managers also stated that the influence of hedge funds and investment banks will taper, while pension funds and sovereign wealth will grow in stature.
