Industry Updates

Fed taper will hurt markets, though hedge funds unconcerned about rates impact

Wednesday, December 11, 2013

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Opalesque Industry Update - Aksia’s third annual institutional hedge fund manager opinion survey revealed that managers are overwhelmingly negative on the potential impact of Federal Reserve tapering on markets. Most managers surveyed expect tapering to begin within the next few months (during Q1 ‘14), and 75% of respondents expect a significant negative impact on global markets. However, just 10% of managers view rising rates as hurtful to their strategy. The survey, conducted in late October through early November, polled 198 managers collectively managing more than $1 trillion in hedge fund assets.

“The survey gets inside the heads of managers and illustrates their opinions about both the markets and the hedge fund business,” commented Jim Vos, CEO of Aksia in announcing the findings. “While altogether a fairly cynical bunch, especially when it comes to newfangled hedge fund businesses, there is also a good degree of optimism about regulatory improvements, the functioning of the markets and longer term economic prospects.”

While hedge fund managers hold a very poor opinion of global political institutions, they are more supportive of central banks. On their handling of the economy and stimulating growth, the Bank of Japan and Prime Minister Abe led the class with a “B” grade, while the U.S. Congress garnered the “dunce” cap receiving an overall “D”, with 38% giving Congress an “F”. Other key findings of the research show:

- Managers estimate they need to deliver, on average, annualized returns of 9% to keep their investors happy;

- Only 1% of respondents say they intend to advertise their funds as a result of the JOBS Act - a definite damp squib;

- More than 70% of managers responding indicate they have no plans to offer 40 Act products;

- Despite the fact that many investors are now seeking out good ESG/SRI practices as criteria for investing, barely 10% of hedge fund managers say they actively apply ESG/SRI policies to their portfolios;

- Emerging Markets and Asian focused managers are the most pessimistic regarding the fundamentals of EM economies in the coming year.

Press release

Aksia is an independent hedge fund research and portfolio advisory firm, serving institutional investors across the globe. With offices in New York City, London and Tokyo, Aksia advises sophisticated investors who currently have more than $49 billion committed to hedge funds. www.aksia.com

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