- The difficulty for hedge funds has been to find the right risk level and thereby create the conditions for generating returns. The financial market is offering a climate favourable to hedge funds, with a number of themes that managers could take advantage of in order to generate value

- The market situation is favourable for hedge funds that can employ several different asset classes to generate value. We note that Global Macro managers are mainly using currencies and fixed income securities to generate value. We also see that they have begun to take more risks than they did during the first half of 2010

- We foresee diminishing opportunities for Distressed strategies, and our advice is to start being cautious about them. For those who want to invest in this type of hedge funds, we prefer broader Event Driven or Merger Arbitrage funds

- On the whole, we regard the potential for hedge funds as good, and we believe that this asset class is highly useful in portfolio-building.

SEB’s two-page article “Global imbalances will benefit hedge funds” can be downloaded from Opalesque: Source

SEB is a Northern European financial group: www.seb.se

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