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By Beverly Chandler, Opalesque London

HSBC’s Alternative Investments’ Tom Collier has published a white paper entitled Europe: Systemic Risk, Idiosyncratic Opportunity in which he concludes that European markets are perfect for hedge funds. "Watching how the crisis is resolved from the sidelines may prove fascinating, but the best time to invest in risky assets is always when others are fearful. Hedge funds investing in Europe should be in their element; embracing risk for which they are being well rewarded and hedging risk for which they are not" he says.

Collier notes that while there have been a number of positive signs of recovery from the waves of financial crises that have hit certain European countries, none of the developments have actually impacted on the indebtedness of these countries. New found optimism has come from the European Commission announcing plans to introduce a permanent European Stability Mechanism, designed to replace the temporary EFSF. Other developments have been:

• Member countries have raised the level of guarantees underpinning the EFSF, such that the facility can now make loans equivalent to its originally announced €440bn size.
• Following increased funding commitments, principally from Germany and France, the ESM will now be able to make loans up to €500m.
• In addition to extending loans to troubled members, these facilities will now also be allowed to buy bonds issued by their governments.
• Significantly however, it se......................

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