HSBC: Hedge Funds Will Shine In 2010

Jun 15 2010 | 6:58am ET

Despite May’s woes, HSBC Private Bank couldn’t be more optimistic about hedge funds.

The firm reiterated its overweight position in hedge funds, saying they are a better bet than global equities, which HSBC slashed its exposure to in April.

“Hedge funds are traditionally well-placed to look at relative value between assets and to exploit pricing anomalies,” Fredrik Nerbrand, head of global strategy at HSBC Private Bank, said. “They also tend to be good at taking advantage of higher volatility in the markets, which we are currently observing.”

Why? “In contrast to the majority of 2009 in which investors were rewarded for taking on risk, we believe 2010 will be a rather different environment—a year of differentiation where equity and bond markets are likely to be lower than they have been since March 2009,” Nerbrand explained. “Therefore, it will be more difficult for investors to make money just by being long; other strategies need to be implemented to increase expected portfolio returns.”

HSBC is especially bullish on long volatility and discretionary macro strategies, Peter Rigg, head of alternative investments at the firm, added.

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