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From Christine Gaylican, Opalesque Asia:

Funds of hedge funds (FOHFs) have showed resilience and cautious optimism in their investments in the last 10 months of 2009, separate studies made by S&P Fund Services and HFN indicated.

Liquidity pressures urged FOHFs to register less in terms of gross net exposures. The HFN Funds of Funds Aggregate index recorded a 4.2% increase over the quarter and is up 8.5% over 2009 to end September (here).

In a statement emailed to Opalesque today, S&P analyst Randal Goldsmith said: "Many funds of hedge funds (FOHFs) are still dealing with liquidity issues beyond the recovery in equity and credit markets. Underlying net market exposures within FOHFs are also below historical levels, but have increased during the third quarter."

Randall added that though net exposure inched up, there is a general sentiment among hedge fund managers that sustainability of the rally in equity and capital markets was still doubtful. Therefore, they preferred to concentrate on "alpha generating opportunities."

According to the HFN report for Q3, leading strategies have been emerging markets, most relative value arbitrage strategies and long/short equity strategies with meaningful net market exposure (......................

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