IAM Says Manager Selection Key To Diversification In 2012

Feb 29 2012 | 8:55am ET

Morten Spenner, CEO of the US$2.5 billion hedge fund of funds International Asset Management, expects manager selection to be one of the keys to “differentiated” performance in 2012.

Spenner says that while developments in Europe have the potential to “meaningfully impact the direction of markets,” IAM expects continued uncertainty and associated high volatility in underlying markets. In this environment, he says, diversification, “sought across strategies as differentiated performance” is more likely to be driven by manager selection.

In its Q1 outlook, the London-based firm’s says high volatility and fixed-income market movements are providing opportunities for managers focused on curve trading, auctions and future levels of interest rates in government bond markets.

In the credit sector, IAM favors managers with fundamental credit and balance sheet analysis skills and technical trading experience. 

In the event driven area, Spenner says specialist managers focused on niche areas of the credit markets have the potential to provide high returns. “RMBS specialists are expected to benefit from low valuations, double-digit running yields, cautious default assumptions, supportive housing data and federal policy. They will also have the potential for capital appreciation to enhance strong returns.”

As for long/short equity, IAM believes specialist areas of focus and “idiosyncratically driven positions” are more likely to provide higher returns.

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