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Taiwanese hedge fund managers look at short-term credit opportunities

Monday, March 19, 2012

From Precy Dumlao, Opalesque Asia – Participants in the latest AsianInvestor's institutional forum held in Taipei, Taiwan have found that Taiwanese hedge fund managers are abandoning their long strategies and looking at opportunities in short-term credit and other non-traditional bond strategies.

Vincent Wu, fixed income CIO for Fuh Hwa Securities Investment Trust told delegates at AsianInvestor’s 6th annual Taiwan Institutional Investment Forum that since the global financial crisis in 2008, Taiwanese fund managers have shifted from the "buy-and-hold" strategy to "buy-and-harvest" stance in keeping with the significant jump in bond fund turn over.

Wu released statistics that showed a drop from 0.7% to 0.3%, in the five-year Japanese government bond yields from 2002 to 2003 that resulted in a one-year capital gain of between 1 and 2%.

He told the delegates, "Last year there were massive fund flows into long-term emerging market debt, but this year the fund flows started to enter emerging market short-term debt and flatten the inverted yield curve. If you invested in short-term debt towards the end of last year you would have made a profit."

Wu also predicted that the one-year capital gain would be maintained below 2% should the U.S. Federal Reserve keeps its interest rates at its current low level until 2014.

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