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Alternative Market Briefing

Hedge funds are keeping exposure in emerging markets at low level

Monday, March 03, 2014

Komfie Manalo, Opalesque Asia:

Hedge funds are keeping their exposure in emerging market at a low level and say they are under invested to the segment, according to the latest survey by Societe Generale.

The survey said many hedge fund managers are sitting out the turmoil in the emerging market despite looking at opportunities to the segment.

Nicolas Campiche, chief executive officer for alternative investments at Swiss private bank Pictet was quoted by CNBC as saying, "Hedge funds are still viewing emerging markets as a great opportunity now that it's no longer moving in synch with other markets."

However, he said hedge funds are still very picky and have limited their exposure through macro managers.

Misha Graboi, a portfolio manager at fund of hedge fund firm Pacific Alternative Asset Management Co. (Paamco) added that it is difficult to run a long-short strategy in emerging market. Graboi pointed out the reality in many emerging markets where outright prohibitions on shorting or liquidity or shorting costs are very prohibitive.

"Sometimes they end up just shorting an index and the problem of shorting the index in emerging markets is that they tend to be dominated by one industry or even one company. Long some stocks and short the index would be an explicit sector bet in some emerging markets," he said.

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