January 05, 2006
Stocks attracting Hedge fund investors
It is no secret now that the overall performance of hedge funds has been by far the lowest in the last three years. This no doubt is not appealing the investors one bit. An overall shift in investment strategy of institutional investors and wealthy individuals is being witnessed. They are now looking at stocks with renewed vigor. They are now willing to invest their money with managers who bet on stocks and economic trends.
Luis Rodriguez who is the head of risk management at Manhattan Family Office in New York, predicts that Global macro will produce the highest returns. This will be followed by equity hedge funds. Luis Rodriguez invests more than a $1billion for a wealthy family. His feels that by following this strategy, he will be able to give a return of 8%.
In the first 11 months of 2005, Equity based hedge funds were able to garner a return of 8.2% where as Macro Funds returned 5.9% according to data compiled by Chicago-based Hedge Fund Research. Macro funds managers evaluate global economies to decide what stocks, bonds, currencies and commodities to buy.
The two strategies have also pulled a sizable part of the total money inflow in 2005. Long-short equity funds have raked in 20% where as macro funds attracted around 16% of the $47.7 billion that flowed into the market.
Till the end of November, hedge funds were able to give average returns around 7.5%. This is a sharp decline from the annual average return of the previous 10 years which is around 12.6%. IHT reports:
“It has been a difficult year to make money because stock and bond prices have barely moved and the Federal Reserve has raised interest rates 13 times since June 2004.”
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