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Alternative Market Briefing

Australian hedge fund investors still on risk-off but there is hope for 2012 and beyond

Monday, December 19, 2011

Damien Hatfield, director of the Sydney-based bureau of advisory group Triple A Partners, keeps on hearing the same things from investors: they’re parking their money in cash, they’re in a risk-off stance. In his newsletter for November 2011, he says that family offices have up to half of their money in cash. Not only that, but he also sees a quiet round of fund redemptions going on. Australian hedge fund managers are generally really struggling to raise assets, even those with good returns.

The investors’ risk adverseness is due to a couple of things, he says. First, "Term Deposits are still short dated but showing 6% p.a. in Australia, but as you get out along the curve, these rates start to really fall off. So why take risk at these rates?" Second, the uncertainties in Europe are a deterrent.

He believes, however, that 2011 has shone a bright light on funds of hedge funds (FoHFs), which could mean they will make a significant comeback, if not next year then soon after. His rationale is that FoHFs – and of course hedge funds - are not as volatile as equities; they hold the road.

"Looking the HFRI Fund of Funds Index, it is down 5% to end of November," he explains. "The intra year drawdown was 7%. The MSCI World is also down 5% to November on an intra year drawdown of 20%. The S&P in spite of everything that has been going on in the world, is only down 2%. But intra year it has been down 20%... The hedge......................

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