Tue, Jun 19, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

FoHFs manager International Asset Management provides Q3 strategy outlook

Thursday, August 12, 2010

Morten Spenner
Opalesque Industry Update - Morten Spenner, CEO at International Asset Management Limited (IAM), one of the oldest specialist independent fund of hedge funds managers discusses IAM's outlook for a range of strategies for the third quarter of 2010. IAM believes credit and equity market conditions bode well for security selection and should in particular benefit long/short equity and credit managers.

Long/Short Equity
Positive return outlook with medium risk outlook

  • Strong earnings growth should help to drive equities higher but macroeconomic concerns are likely to put pressure on markets again in the future. We believe equity markets have over discounted the risks of a double-dip in economic growth and therefore currently offer reasonable value.
  • Equity correlations are much higher than usual and we expect them to come down again over time as equity markets revert to being driven more by fundamentals. There will be less magnitude in the daily divergence and a greater mix in stock and sectoral performance. This should, once again, create a more constructive environment for fundamental stock picking and aid the ability to add value in both the long and short sides of the book.
  • Asian and Emerging Markets continue to offer the highest secular growth opportunities while the US economy remains in the forefront of the recovery amongst developed countries. We continue to favour long/short equity managers focusing on the US, Asia and Emerging Markets.
Credit
Positive return outlook with medium risk outlook
  • Micro corporate factors will increasingly drive spread movements rather than more intermittently coming to the fore as at present. However, for the time being, they continue to be influenced and dominated by macro factors.
  • Valuation anomalies persist in the pricing of securities within the capital structure of corporates in both investment grade and high yield bonds. These opportunities persist across sectors and geographies.
  • Long exposure to restructuring situations could continue to be beneficial to returns, although as prices improve so the potential for volatility increases.
  • Differentiation in credit quality, continued valuation anomalies and potential for further stress continue to create a plentiful opportunity set, albeit within a more difficult trading environment.
Macro
Positive return outlook with high risk outlook
  • Future curve movements present good trading opportunities for the next quarter. There are significant growth disparities between regions and countries which are not adequately reflected in bond markets. Cross market and relative value trading should therefore pick up.
  • Future currency movements could revert to being driven by global differences in the financial strength of countries and their consumers. It is therefore likely that Macro managers will further short the euro and add to exposure in Emerging Market and Asian currencies as trends become increasingly established
  • Currency volatility remains higher than average and will thus provide further opportunities for traders.
Event Driven
Neutral return outlook with medium risk outlook
  • Merger arbitrage spreads have continued to provide a steady source of returns for even driven hedge fund managers but returns would benefit from a greater number of deals and wider spreads.
  • Multi-Strategy Event Driven managers that can be selective across a wide range of opportunities in merger arbitrage and credit securities, across the capital structure including distressed, continue to be favoured.
  • While there continue to be risks in both the equity and debt markets, pricing levels are now more favourable and upside potential in certain deals has increased. Managers in this strategy are able to capture gains from idiosyncratic events which have less dependency on market conditions.
Fixed Income Relative Value
Neutral return outlook with medium risk outlook
  • Managers in this strategy will continue to trade the "lower for longer" theme but trading opportunities at the front end of curves are now much more tactical and offer less upside.
  • The recently increased level of bond volatility has improved the opportunity set for trading orientated managers.
Divergence in economic developments across countries is providing opportunities in rates and currency trading. US dollar trades against the euro are expected to continue to feature. Trend Followers/CTAs
Neutral return outlook with high risk outlook
  • In Q2, the strong trends and rising exposure to fixed income markets were the drivers of performance in this strategy.
  • Managers with medium to longer-term models in this strategy could be better in line to benefit from greater trends emerging. However, with the recent exception of movements in the fixed income markets, conditions have once again become more choppy, range bound and subject to reversals in the equity, commodity and foreign exchange markets, making them more suitable for managers with short-term models.#

Corporate website: www.iam.co.uk

- FG

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. North America - George Soros: 'Everything that could go wrong has gone wrong'[more]

    From Marketwatch.com: George Soros, tell us how you really feel. 'Everything that could go wrong has gone wrong. [Trump] is willing to destroy the world.' The 87-year-old billionaire clearly isn't shy about expressing his generally liberal views and distaste for Trump's "America First" platform,

  2. Paper: The performance of stocks actively pitched by hedge funds[more]

    Using a novel dataset drawn from investment conferences from 2008 to 2013, I show that hedge funds take advantage of the publicity of these conferences to strategically release their book information to drive market demand. Specifically, hedge funds sell pitched stocks after the conferences to ta

  3. North America - US fundraising for special purpose acquisition vehicles hits record this year[more]

    From AFR.com: Special purpose acquisition vehicles (spacs) are hitting the US market at the fastest rate on record, attracting the likes of Goldman Sachs and hedge fund investor Daniel Loeb for the two largest such deals in 2018. Spacs have raised $US4.5bn so far in 2018, the largest amount fo

  4. Investing - Man Group and AQR try to take aim at private equity industry, Hedge funds poised to be winners in AT&T-Time Warner deal[more]

    Man Group and AQR try to take aim at private equity industry From FT.com: The popularity of private equity investments has prompted asset managers such as Man Group and AQR to devise strategies that aim to replicate PE returns but at a much lower cost to investors. Both companies a

  5. News Briefs: David Stemerman's hedge fund holdings shrank before his run for governor, nvestment manager TSW triggers succession plan, Alan Howard joins Peter Thiel investing in Cologne-based fintech startup[more]

    David Stemerman's hedge fund holdings shrank before his run for governor But the U.S. holdings of Stemerman's Greenwich hedge fund, Conatus Capital, shrank from $2.6 billion at the apex to just over $1 billion before he announced his move into politics. (Hartford Courant) Inv