Funds Hub
Money managers under the microscope
Gerard Fitzpatrick: Positive on global growth
Guest blogger Gerard Fitzpatrick is portfolio manager at Russell Investments, where he runs a $5 billion global bond fund.
The views expressed here are entirely the author’s own and do not constitute Reuters point of view.
The global economic outlook is positive overall, currently powered by China and America’s twin engines of growth. Questions have been asked about the level to which the Japanese disaster may slow down the world’s economic recovery, but in reality, it’s expected to have only a small negative effect on global growth this year.
Europe remains constrained by the Euro sovereign crisis, and we expect to see only low levels of European growth. Europe is moving in the right direction, but there are still lingering challenges. Despite Greece and Ireland remaining at risk of default, the economic outlook is moderately positive.
The Portuguese parliament has taken a striking gamble that will be acutely monitored by other European governments and bond investors. If they continue their refusal to accept harsher austerity measures, the outcome for Portugal could simply be binary, where either deeper support from the bailout providers will be made to balance the books or their refusal to accept such harsher austerity could push the already politically stretched bailout providers to breaking point. At an extreme, this could push Portugal into an abyss of confidence with bond investors and rating agencies.
Previously, the best stand-alone defence peripheral European governments held versus an ever increasingly sceptical bond market was a commitment to austerity measures to help stem the rising tide of indebtedness. If you take that defence away, the gambling peripheral country could drown.
The world has only just come out of a recessionary environment, and we expect inflation to remain relatively low in key global bond markets for several reasons.
Morning Line-up: Japanese ETFs, UK non-doms, Swiss hedge fund
News and views on the asset management industry from Reuters and elsewhere:
U.S. investors place record wager on Japanese funds – New York Times
UK wealth industry relief at new rules on non-doms – Reuters
Morning Line-Up: Libya and Madoff, hedge funds in North Africa, China in Japan
News and views on the asset management industry from Reuters and elsewhere
Libyan state fund rejected Madoff offer – FT
Hedge funds wary of punts on North Africa chaos – Reuters
China’s stealth investments in Japan – WSJ
Morning Line-Up: Japanese hedge, Madoff, Calpers helps probe
News and views on the asset management industry from Reuters and elsewhere:
Japan leads hedge funds return league – Reuters
Madoff says hedge funds, banks knew of his Ponzi scheme – NYT
Yen? Too late.
European investors have missed the boat if they wanted to adjust their portfolio to take advantage of a rising yen as the currency has peaked, says BNP Paribas Asset Management’s Hubert Goye.
You can watch his interview with Reuters Insider here: http://link.reuters.com/ket58n
Edward Cartwright: New dawn for Japanese hedge funds
Edward Cartwright is head of business development at alternative investment manager LGT Capital Partners in London. The firm runs $18 bln in hedge fund and private equity assets.
The views expressed here are entirely the author’s own and do not constitute Reuters point of view.
If, like me, you have followed its stock market over the past 20 years, you may have concluded that far from being the land of the rising sun, Japan is the land of the false dawn.
After the initial collapse in prices in the early 1990s, countless commentators have tried to persuade investors that now is the time to re-engage with what is still (just) the world’s second largest economy.
With the exception of the rally immediately after the Asian financial crisis in the 1990s and the second half of 2005, pretty much all of these predictions have come to nothing, and more pertinently, many people have lost a lot of money thinking that Japanese stocks are finally worth buying. Even the two occasions when markets did forge ahead were swiftly followed by another big lurch downwards.
The systemic problems in Japan are well chronicled. Policy makers were incredibly slow to force financial institutions to address their non-performing loans; the Yen has, in general, strengthened at the worst possible time from an export perspective; the demographics are stunningly scary; the central bank has run a zero interest rate policy for so long that its ability to influence matters is much reduced; and the new government looks almost as inept as the previous incumbents. I could go on but I think you get the gist.
We have increased the Japanese hedge fund exposure in Castle Asia Alternative, our London listed fund of Asian hedge funds, to 30 percent of total assets.
Phone home
Spare a thought for quant-heavy hedge fund firm BlueCrest.
The company’s systematic trading funds rely on the supercooled servers that crunch the numbers to run their, hopefully money-making, algorithms, so it must have come as quite a shock when their Japanese hardware was put under lock and key when Lehman bit the dust.
One year on and the firm is still waiting for a postcard. BlueCrest traders have even started calling the imprisoned server ‘ET’, after the castaway alien in Steven Speilberg’s teary blockbuster.
Of course, the Japan leg of the business isn’t running it’s black box strategies through the office Casio calculator. It resurrected its own Japanese infrastructure and now has a server humming and blinking away in a third-party data centre, coincidentally right next door to its incarcerated predecessor.
