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Peter Clarke Benedicte Gravrand, Opalesque Geneva:

Peter Clarke, CEO of Man Group plc, the $52.7bn hedge fund firm with head-quarters in London and other main offices in Pfaeffikon, Switzerland, discussed the key challenges facing the hedge fund industry and its long term prospects during an IIR conference in Pfaeffikon last week.

Key challenges The first one, Clarke said, is performance. Many things have changed in the last few years: markets, parameters, expectations and requirements of investors and of regulators and politicians. Since the beginning of the financial crisis, we have seen liquidity problems, asset prices collapse and volatility spiking and volumes declining.

"Indeed, a perfect storm for the asset management industry," he noted. The policy reaction (injecting liquidity and bringing down interest rates) did sustain asset pricing and re-balanced volumes and volatility. But there is a price to pay. And that sits in the context of investment returns and counterparty quality, and "most annoyingly" in the alternatives world, in asset correlation. So producing uncorrelated returns is now more challenging.

Only bonds have seen progressive returns since January 2007. World stocks, even if they have done well lately, have seen high volatility. "Mos......................

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