Money managers under the microscope
Given the amount of money central banks have been pumping into the global economy you’d be forgiven for thinking we should be getting a pretty decent recovery right now. And whilst that seems true for emerging markets, market participants and consumers just can’t rid themselves of the feeling that there is another shoe yet to drop.
Citi’s Matt King encapsulated this general nervousness in his presentation at the CFA Institute’s European Investment Conference in Copenhagen on Tuesday. And according to King, there are some very good reasons why corporates and households just can’t bring themselves to load up on more debt.
“We’ve had the worst recession since the 1930s, but it doesn’t feel like it, because we haven’t taken all the pain yet,” he said. “We’ve simply shuffled the debt around – that’s why markets are still so volatile and correlations are so elevated.”
King argued that if this is a normal cycle, corporates will soon come under pressure from shareholders to start borrowing again in order to invest and expand. “The risk is this is not a normal cycle, but something different,” he said.
In a desperate attempt to win market share, prime brokers are courting blue-chip hedge funds with offers of cheap credit. But are hedge funds biting?
By Lorraine Turner
Speakers at the Reuters Hedge Fund and Private Equity summit this week were asked “what keeps you awake at night” and the answers were wide-ranging, from “my 7-week old daughter” to “the next meteorite”.
Some executives are left counting sheep over the heavyweight questions that are plaguing our economies such as how low investment markets will fall or how the credit crisis can be eased as businesses remain stymied by a lack of credit.
The timing of the Alternative Investment Management Association’s hedge fund disclosure initiative indicates just how strong the winds of change are blowing in hedge fund land.
Coming just a day after ECB President Jean-Claude Trichet called the credit crisis “a loud and clear call” for extending hedge fund regulation, the move shows the hedge fund industry feels it must be more active in deciding the future shape of regulation.
It may not have been a massive surprise, but ECB President Jean-Claude Trichet had an unwelcome message for hedge fund managers today.
The current crisis is, apparently, “a loud and clear call” to roll out regulation to all important market players, “notably hedge funds and credit rating agencies”.