« More U.K. pension plans In HFs | Main | Strong demand for quality funds »
January 24, 2008
Hedge funds 'will make double digits'
THE US is already in recession and hedge funds are set to make returns approaching double digits for the second year running, according to the research chief of one of the world's biggest hedge fund groups.
"We are in a recession. It's not a question of whether it's a hard or soft landing, but how long it will continue," said Thomas Della Casa, head of research at British-listed Man Investments.
But he said it would most likely be a short recession, "like the one in 2001", which would be over by the US election in November.
Speaking from his base in Taipei, Mr Della Casa said he believed the equities bear market dated back to November - but it had been overdone given the relative strength of the non-US dollar denominated world economy.
"I would say that the market is as oversold as it was 10 years ago when we entered the Asian crisis," Mr Della Casa said.
"The panic was out there."
Man is one of the top three hedge funds in the world and manages $US70 billion ($80.5 billion).
It operates as a fund of hedge funds as well as running its own quantitative and other hedge funds.
But Mr Della Casa said recent lows could be tested within a few months if more bad news emerged from credit card providers and car loan groups in the US.
He said there were two things hanging over the US economy.
"Consumption will decline by the debt-ridden public (in the US) and a lot of people are scared it will spill over into Asia and China," he said.
Mr Della Casa predicted that growth in China could drop from as high as 12 per cent to 10 per cent or even 8 per cent, depending on how long the recession in the US lasted.
He said the market always looked about six months ahead of economic fundamentals.
But he said the debt crisis was still not over.
In the past week billions of dollars had been written down by major investment banks with more to announce losses in coming weeks.
"I am shocked that the banks do still not have a total look-through in their debt problems," Mr Della Casa said.
"There is still potential that more will come from credit card providers and car loan providers."
He said hedge funds would be wary of current conditions in recent weeks but would start moving into the market now.
"Since the beginning of the year the markets have been extremely difficult - they have been so emotional," Mr Della Casa said.
It had been the worst start to the year for global equity markets since 1932.
"Most of our funds have been holding cash in a neutral position," Mr Della Casa said.
"But they will benefit when the market calms down. You will have seen some activity today but I don't think they have been extremely active over the past few weeks." Mr Della Casa said equity markets tended to start rebounding around the middle of a recession.
"It will be in the second or third quarter and will be before the US election. The US Federal Reserve is supporting that."
He said that last year was the best year for hedge funds since 2003, handing investors returns of 10 per cent or more compared with 3.7 per cent for the MCSI global equities index and 5.3 per cent for bonds. He predicted that with bond markets shot and equities markets in turmoil, hedge funds could again generate double digit returns this year.
-The Australian News-
Posted by su at January 24, 2008 3:03 PM