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December 9, 2005
Funds of hedge funds eye Japanese stocks
Funds of hedge funds expect to make steady returns in the first half of next year and remain upbeat on the outlook for Japanese stocks, a Reuters poll shows.
The Reuters survey of 11 funds of hedge funds, which together manage some $73.9 billion (42.3 billion pounds), forecast average returns in the first and second quarters of next year.
Expectations of returns for a range of strategies and asset allocations were broadly unchanged from the previous poll in September.
Funds of hedge funds spread their money between hedge fund strategies to minimise risk, investing in a range of different assets, and should in theory make money even in a falling market as they can borrow assets they don't own to sell short.
The survey showed them allocating the biggest chunk of their money -- an average of 38.5 percent in the first three months of 2006 -- to the long/short equity strategy, which buy stocks seen as cheap and short sells those that are expensive.
On a regional basis, the survey showed funds expect Japanese stocks to outperform U.S. and European markets and to make above average returns in both the first and second quarters as the Japanese economy strengthens further.
"The possibility of an end to deflation next year should be generally supportive for asset prices, particularly equities," said Tim Gascoigne at HSBC Republic Investments in London.
"The (Japanese) economy is finally turning around ... everyone is scrambling to get into that asset class (equities)," he added, saying that potential reforms could further boost the Nikkei average from around five-year highs currently.
Six of the funds in the Reuters poll picked long/short equity -- or some form of it -- as their hot strategy over the next three to six months.
-Reuters-
Posted by su at December 9, 2005 11:03 AM