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Alternative Market Briefing

Fund of hedge funds group FRM comments on risk averse Fed

Tuesday, October 08, 2013

Beverly Chandler, Opalesque London:

FRM, Man Group’s $16.7bn fund of hedge funds business, has published its Early Bird notes on September admitting that, in contrast to their prediction, the Federal Reserve continued with monetary stimulus. "We are now confronted by a Fed that is likely to be more risk averse and for longer than we previously thought. It is more than possible that the price for the short term status quo is a more disorderly exit in the future; but for now there are more pressing concerns" the firm writes.

September saw large inflows into fixed rate products, the fourth largest weekly flow on record with $3.1bn, with significant cash still to be invested. FRM believes that emerging market assets were perhaps the clearest beneficiaries of the non-taper. "Though the fundamental problems with the balance of payments in several large emerging market countries remains, the short term pressure has at least somewhat abated. It was notable that following the meeting, currencies of those countries that have been most impacted by outflows were stronger against the USD, a reversal of the moves seen since the 'taper talk’ began. Across the board emerging market equities were stronger over the month, helped not only by the continuing liquidity, but also by a constructive set of data releases from China."

Despite all the good news, and relatively heavy volumes, FRM notes that the US market is no high......................

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