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Money managers under the microscope

Permal’s picks for 2011

It’s always tricky to know what the New Year will bring for investors, but fund of hedge fund firm Permal has stuck its neck out and is backing long-short equity, merger arb and commodity funds for 2011.

The reasoning goes that, despite fears over Europe’s sovereign debt crisis and a possible double dip recession in the U.S., 2011 will in the event prove fairly benign for investors, senior executive officer Omar Kodmani told me in an interview last week at Permal’s plush St James’s offices.

Unless you’re a vol arb or black swan fund, what most hedge funds tend to dislike are choppy markets where investors indiscriminately sell or buy. Markets, it seems, have now started differentiating between good and bad quality stocks and, coupled with cheap U.S. equity valuations, this is what Permal thinks will help long-short funds.

Merger arb, meanwhile, which dominated fund launches earlier this year, should benefit from higher-than-usual M&A spreads because bank prop desks are still not as active as they were.

Morning Line-UP: Falling short on disclosure and a European venture

RTR1SGF8News and views on the asset management industry from Reuters and elsewhere:

UK managers fall short on disclosure - Reuters

US govt related holdings boosted in Pimco fund – Wall Street Journal

Survey sees greater hedge fund exposure - Financial Times

Paulson taps into Europe – Wall Street Journal

from Reuters Money:

The year’s best and worst ETFs

Dealers work on the trading floor at IG Index in London May 10, 2010. REUTERS/Suzanne PlunkettThe best investments often don't have the highest returns. I know this is heresy to most, yet mass behavior can be a siren song.

About this time every year, we gaze intently at our portfolios, hoping against hope that we did something right. Sometimes we get lucky.