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Money managers under the microscope

Going global

February 10, 2009

rtr1u4b7Global macro and managed futures (CTAs) are still where it’s at, it seems, when it comes to funds of hedge funds.

Nigel Davies’ poll of portfolio managers shows these are the two strategies they are expecting above average returns from in the first half of 2009.

It is little surprise that these two strategies have been picked out.

After funds of hedge funds’ worst-ever returns last year — a loss of 19.97 percent, according to Hedge Fund Research — managers are bound to look to those few strategies that did well.

Managed futures returned an impressive 18.33 percent, according to Credit Suisse/Tremont, while global macro lost 4.62 percent — a loss, but much better than the average.

What’s more, managed futures and global macro are both highly liquid strategies, and after the evaporation of liquidity in some credit markets and the gates or suspensions subsequently imposed by some funds, funds of funds are likely to want ready access to their money.

This is especially true after many had to pay out cash reserves on margin calls on currency hedges after the dollar’s strong rise against the euro and sterling — cash they could have used to meet redemptions.

And while there is no certainy equity or credit markets will recover this year, there are likely to be plenty of big market trends, whether up or down, to play.

Betting on last year’s better strategies may seem like actions based on hindsight, but during the fund of hedge funds industry’s current woes, it is probably a lower risk strategy.

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