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Hedge funds see best gains for 16 months, latest figures show PDF Print E-mail
News - Funds
Monday, 18 October 2010 08:22

Hedge funds saw their strongest gains in 16 months in September, helped by climbing stock prices around the world, according to the latest data.
 
Singapore based fund tracker Eurekahedge said its hedge fund index was up 3.45% month on month at the end of September, raising returns since the start of the year to 5.15%.
 
‘All regions and strategies posted positive returns in September, as Greater China hedge funds gained 7.02% during the month,’ said Eurekahedge which publishes a series of indices on a monthly basis measuring the returns of hedge funds by region and investment strategy.
 
Hedge funds investing in emerging markets advanced strongly in September, with Asia, excluding Japan, delivering the best performance of 6.03%, followed by funds focused on Eastern Europe and Russia, at 3.9%.
 
Among the different strategies employed by hedge fund managers, long-short equities delivered the best performance with a gain of 4.33%.
 
Eurekahedge said the strong performance by hedge funds in September was helped by rising financial markets, with the MSCI World Index gaining 6.75% and bonds rallying amid speculation of further quantitative easing by the US Federal Reserve.
 
Some of the world’s most successful hedge fund managers revealed that they have turned more bullish on the US stock market against a backdrop of stronger corporate and consumer balance sheets, as well as low interest rates.
 
‘I see a lot of reasons for economic improvement in this country. We’ve got an improving consumer balance sheet and great corporate balance sheets. The only ingredient that’s missing is confidence,’ said William Ackman, who as chief executive of Pershing Square Capital Management oversees $7 billion.
 
Ackman added that the environment is ripe for more acquisitions, which will increase the value of the stock market.
 
Maverick Capital's Lee Ainslie said he is also bullish on stocks, particularly in technology, where he said stocks are the cheapest in 20 years. Ainslie, who oversees $11.4 billion at the Dallas and New York based hedge fund, said that, while fundamentals have not been a significant driver of the stock market over the last few years, the stockpiles of cash on corporate balance sheets make equities compelling.
 
Companies are now holding more cash on their books than they have since the 1950s, Ainslie explained and said that the itch to put that money to work will likely spark shareholder friendly activities.
 
‘It is sitting there and not being used. We want to make sure these companies are using cash in productive ways like buybacks, dividend payments or acquisitions,’ he told a conference in New York.
 
Zeke Ashton of Centaur Capital Partners said he was seeing opportunities in out of favour sectors such as property and capital insurers, asset managers and retailers. Hedge fund managers from India and Spain also said they saw the ability for investors to cherry pick value stocks in their regions.
 
‘I think 2010 to 2012 is going to be a more stable period than the last two years we just had. It may be a lot more serene than you think,’ said John Burbank, chief investment officer of San Francisco based hedge fund Passport Capital.
 
But he warned that ‘calamity’ may be approaching after then and said it is sometimes useful to think about the US economy as an emerging market. He said about 8% of Passport's $3.4 billion portfolio is in physical gold, a safe haven that hedge fund investors have flocked to over the past year.
 
And while some hedge fund investors made a lot of money from short bets against the sour economy over the past few years, that approach may not work going forward, he added.
 

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