15/10/2010
Hedge funds having trouble finding sources of alpha
Despite good results in September, hedge funds are still experiencing difficulty in finding solid sources of outperformance, the ratings agency Fitch Ratings says in its most recent quarterly letter dedicated to hedge funds. “Systemic risk has not dissipated and continues to cause difficulties for directional strategies, particularly equities and macro, which have been particularly affected by increasing correlations between asset classes, and the behaviour of the market, which has been described as “risk-on/risk/off,” says Olivier Fines, managing partner at EMEA Fund and Asset Manager Rating.At the same time, Fines adds, “relative value and event-driven strategies have managed to profit from low interest rates, an increase in corporate activity, and a wider range of inefficiencies in various fixed income sectors, interest rate curves, and credit.”Aymeric Poizot, senior director and head of the group at EMEA Fund and Asset Manager Rating, says “investors may need to refresh their approach to evaluating the merits and the logic behind investing in hedge funds. Expectations of returns need to be revised downward, and the emphasis is increasingly on the flexibility of managers, i.e. on their trading abilities in macro and long/short strategies, and on their relative size and diversification in relative value and event strategies.”
