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Hedge fund managers see short-term volatility, long-term opportunities in European credit

Friday, October 28, 2011
Opalesque Industry Update - Credit Suisse’s Asset Management division today announced the release of the fourth quarter 2011 edition of its “Asset Management Alternatives Quarterly.” This thought-leadership series, which includes a white paper and video, offers insights from Credit Suisse Asset Management’s CIO Office and leading alternatives portfolio managers on global economic trends and capital markets.

In this edition, Credit Suisse Asset Management’s CIO Office discusses the drivers of recent volatility in world capital markets, including poor macroeconomic data from developed economies and continued uncertainty over the Eurozone sovereign debt crisis.

Emerging markets were also affected by developed markets’ slowing growth in the third quarter, as investors shied away from risk, generating further volatility. According to the white paper, however, emerging market economies remain fundamentally healthy, as evidenced by still robust growth rates and low debt ratios. In addition, receding inflation worries should enable emerging economies – such as China – to shift its focus from fighting inflation to bolstering economic growth.

Other key themes in the Q4 2011 issue include:

  • Event driven and relative value hedge fund managers believe that while the short-term environment remains volatile, in the long run, opportunities in credit may be developing in Europe. Future potential recapitalization of the financial sector and further deleveraging of the corporate debt sector may point to multi-year, credit-related investment opportunities across many sectors. 
  • The Credit Investment Group remains cautious with regard to the broader asset class in the near term. As such, they are defensive from a portfolio management perspective, emphasizing senior- secured bonds and overweighting higher-rated bonds with potentially superior risk-return profiles. 
  • Current market volatility and increasing corporate cash balance sheets may present an opportunity for private equity managers, particularly for those focused on special situation and Euro distress- for-control strategies. 
  • The Commodities Group believes that despite the volatility in capital and commodity markets, long- term fundamentals (i.e., tightening supply) for select commodities, such as agriculture, industrial metals and energy, remain positive. Press release: Source
- FG

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