Fri, Feb 12, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

International Asset Management Q2 strategy outlook

Tuesday, May 25, 2010
Opalesque Industry Update - Morten Spenner, CEO at International Asset Management Limited (IAM), one of the oldest specialist fund of hedge funds manager, discusses his outlook for a range of strategies for the second quarter of 2010, including which strategies IAM favours most and for which it holds a more cautious stance over.

Long/Short Equity
Positive return outlook with medium risk outlook
§ Equity markets are increasingly being driven by fundamental factors than macro ones. This is evidenced by less sector divergence on a daily basis, increasingly mixed sector performance and less correlation within equity markets. Managers in this strategy should therefore be able to add value through stock selection.

§ We favour long/short equity managers focusing on the US, Asian and emerging markets and those with a variable bias and a trading-orientation because of the preference for managers that are nimble and flexible in market conditions that are anticipated to change.

Macro
Positive return outlook with high risk outlook
§ Future currency movements are likely to be driven by global differences in the financial strength of countries and their consumers.
§ Yield curve steepening trades remain popular, reflecting current views on short-term interest rate movements and the longer-term uncertainties regarding future levels of inflation, the size of government debts and the overall economic environment.
§ The exposure of macro managers to equities and commodities remains generally low. However, the overall stance taken by managers is to be long of commodities and exposure to equities is likely to rise on market corrections.
§ Economic developments are expected to continue to create movements in the fixed income and currency markets which should provide an expanded opportunity set for trading orientated macro managers.

Credit
Positive return outlook with medium risk outlook
§ Spreads have tightened to pre-crisis levels and high quality investment grade bond yields have little room to further tighten and therefore could widen. Spread movement is being driven by macro and corporate factors.
§ Valuation anomalies persist. High yields appear to offer greater level of mispricings with the pool of stressed assets still historically high. Shorting is expected to be more rewarding in 2010 than in 2009.
§ The level of downgrades to credit ratings is predicted to continue to rise in 2010 and not peak until 2011.
§ Differentiation in credit quality, continued valuation anomalies within high yields and many stressed securities continue to create a plentiful opportunity set for managers with a long/short approach.

Event Driven
Neutral return outlook with medium risk outlook
§ We believe that M&A activity levels have troughed in 2009 and are expected to continue to trend upwards. Merger arbitrage spread levels are providing consistent returns for hedge fund managers.

§ We are seeing increasing hedge fund participation in equity restructurings. This is indicative of the better conditions in debt markets but also of the opportunity to capture equity-like upside as companies emerge from bankruptcy.

§ Multi-Strategy Event Driven mangers that can be selective across a wide range of opportunities in merger arbitrage and credit securities across the capital structure including distressed are favoured.

Fixed Income Relative Value
Neutral return outlook with medium risk outlook
§ Managers will continue to trade the “lower for longer” theme but trading opportunities at the front end of curves are now much more tactical.

§ Yield curves are currently steep but movements are expected to result from changes to inflation, monetary policy, existing QE policies and macroeconomic developments.

§ Active trading around government auctions will continue to provide positive contributions to performance.

§ Divergence in economic developments across countries is also providing opportunities in rates and currency trading. US dollar trades against the Euro and Sterling are expected to continue to feature.

§ The average returns achieved by fixed income relative value managers are likely to be in line with historical norms of high single digits.

Trend Followers/CTAs
Neutral return outlook with medium risk outlook
§ Last year was characterised by trend reversals, market choppiness and declining levels of volatility across asset classes. This created challenging conditions for CTAs managers and rolling 12 month returns were at the bottom end of our historical range at the beginning of this year.

§ However, the outlook for CTAs has arguably become more favourable lately. While trends are not yet very strong, managers have added to allocations across the board and particularly to equities and foreign exchange markets. Some programs have significantly increased their levels of margin to equity.Corporate website: Source
KM

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Credit Suisse cherry picks hedge fund ideas[more]

    From FT.com: Credit Suisse Asset Management plans to cherry pick profitable concepts from hedge funds with the launch in Europe of a “best ideas” strategy. The investment arm of the Swiss bank said the strategy will separate it from other funds blighted by “overcrowding problems”. It comes at a time

  2. Investing - Hedge funds bet on risks in U.S. blue-chip debt, Hedge funds bets against bank credit risk paying off, Tiger Global still likes Internet names, gets pointers from Jeter[more]

    Hedge funds bet on risks in U.S. blue-chip debt From WSJ.com: Hedge funds are betting the next bond sector to crack will be the $4.5 trillion market for the safest U.S. corporate debt. New York’s Perry Capital has placed a $1 billion wager against investment-grade bonds issued by 10 comp

  3. Short Selling - Hedge fund manager Kyle Bass is shorting real estate—again, Top US hedge fund has €80m short position in Paddy Power Betfair[more]

    Hedge fund manager Kyle Bass is shorting real estate—again From Fortune.com: He also predicted the mortgage crisis in 2008. Hedge fund manager Kyle Bass, who runs Dallas-based Hayman Capital, tanked the stock of a little-known real estate financier Friday by revealing that he is shorting

  4. Investing - Real estate secondaries sole 'bright spot' in 2015, As hedge funds stumble, one firm prepares to buy illiquid stakes[more]

    Real estate secondaries sole 'bright spot' in 2015 From IPE.com: The secondary market for property was the sole “bright spot” over the course of 2015, as hedge fund secondaries saw deals fall by two-thirds, according to a wide-ranging survey of the market. Setter Capital said 2015 saw th

  5. Asia - Hedge fund manager Kyle Bass estimates China's foreign reserves below critical level[more]

    From Nasdaq.com: Investor Kyle Bass stepped up his attack on China's currency, arguing in an investor letter distributed Wednesday that the second-largest economy's foreign reserves are "already below a critical level." The comments mark the latest effort by hedge funds and other investors to raise