Poll: 42% Of Hedgies Believe Italy, Spain Could Default

Nov 29 2011 | 7:13am ET

A significant portion—42%—of the 125 hedge fund managers polled by hedge fund research firm Aksia see potential for a default and restructure by Italy and Spain.

The same survey, conducted in recent weeks with managers representing about $800 billion AUM, shows that 60% believe Greece could leave the Eurozone and 65% think EU member states may issue Eurobonds.

A full 94% of managers call for further monetary easing by European authorities and 80% believe the U.S. Fed’s ‘Operation Twist’ will have no impact on financial markets. Asked to grade central banks and political leaders on their response to the financial crisis, the hedge fund managers gave the Fed and emerging market central banks a “B,” while U.S. and EU leaders received failing grades.

The survey also found that hedge fund managers are more bearish on global and Chinese GDP growth than 2012 International Monetary Fund forecasts.

Most hedge fund managers see new financial regulations as “irrelevant” to their strategies, while 21% believe they will be beneficial.

According to the survey, 32% of hedge fund managers see “great opportunities” in this highly correlated environment.

Hedge fund managers expect markets to remain range-bound over the next 12 months, driven by macro factors rather than fundamentals. Global macro is predicted to be the best performing strategy.

The common level at which managers with CDS spread-triggers begin moving prime brokerate balances away from counterparties is 400 basis points.

Aksia found what it termed a “generational shift” in industry transparency, with 26% of funds under 2 years old providing full portfolio disclosure compared to 9% of funds over 10 years old.

A full 54% of managers send position-level data to third-party risk aggregators.

Said Jim Vos, CEO and head of research at Aksia:

“Many of the survey’s findings run against conventional wisdom. Investors are often bombarded with opinions espoused by intermediaries, which may or may not match the actual views of hedge fund managers. This was an opportunity to get the opinions that may matter most.”


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