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From Kirsten Bischoff, Opalesque New York:

A recently released Bank of America Merrill Lynch survey of hedge fund managers showed that most of the industry expects the US Fed to keep interest rates at very low levels through the end of 2010. Last week Fed Chairman Bernanke strengthened this supposition even further during his semi-annual testimony to the U.S. Congress when he said that although the Central Bank raised the discount rate (to banks), the federal funds rate would not necessarily rise anytime soon.

With hedge fund performance essentially flat through the end of February, and market volatility expected to continue through the foreseeable future, managers are on the hunt now more than ever for additional sources of alpha.

One area they are paying more attention to is the possible returns their cash portfolio can be gaining. “Depending on your performance, another point or two over a year can make the difference in passing your internal benchmarks,” says Jill King, VP and Senior Portfolio Manager at Horizon Cash Management. “That little bit extra can be instrumental in the way the year turns out.”

These incremental gains are more important than they ever were before, as many hedge funds are still a few percentage points away from previous highwater marks on investor assets, which keep a fund from collecting performance fees.

The combination of investor interest in all aspect......................

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