Hedge fund investors have a change of heart
A lot has changed since March. Just four months ago, when Credit Suisse asked hedge fund investors if and how they planned to allocate money to a variety of strategies in the coming year, they were more enthusiastic about emerging market equity strategies than any other tactic but long/short equity. But there’s an obvious explanation for the abrupt change in sentiment. Several consecutive years of low interest rates around the globe had investors starved for yield, and many of them went looking for it in emerging markets. Fast forward four months – which is also two months after Federal Reserve Chairman Ben Bernanke first revealed that the American central bank would likely start winding down sometime this year the monthly asset purchases that have been keeping a cap on interest rates– and that hunger for fast growth no longer has such an exotic taste to it.
Twenty-one percent of global investors said they would be increasing allocations to emerging markets equity strategies, while only 11 percent said the same for emerging markets fixed income strategies. Net demand for emerging market equities dropped from 34 percent of investors to 0 in just four months, while net demand for credit fell from 7 percent to -18 percent. The pain in emerging markets bonds seems like it’s not over yet. (In the charts below, + signifies increasing allocation, 0 signifies stable, and – indicates decreasing allocation.)
As always, investors’ allocations varied widely depending on their domicile. For example, even with an overall dampening of interest, Americas-based investors were nevertheless much more positive about emerging markets fixed income strategies than those in the Asia-Pacific region. Seventeen percent of Americas-based investors said they would increase allocations, but not a single Asia-based investor said the same.
Attachments: Source: Credit Suisse Mid-Year Survey of Hedge Fund Investor Sentiment
For more on this story go to:
http://www.thefinancialist.com/hedge-fund-investors-have-a-change-of-heart/