Survey Says Investors To Flock To Relative-Value Credit

Jul 31 2012 | 11:20am ET

Relative-value credit hedge funds' good year is set to continue, according to an investor survey.

More than half of investors polled by Credit Suisse say they plan to allocate money to such funds in the third quarter, making it the most popular hedge fund strategy at the moment. Investor appetite for relative-value credit has grown in the wake of the JPMorgan Chase credit derivative disaster, which many credit funds profited handsomely from as the bank lost nearly $6 billion.

In Credit Suisse's previous Hedge Fund Investor Survey, relative-value credit was only the fifth most-popular strategy.

"Investors have got plenty of volatility in their book right now," Credit Suisse's Robert Leonard, global head of capital services, told Reuters. "They are looking for strategies that are less volatile, and I think credit is one of those."

Half of the 157 investors polled said they planned to increase their allocation to global macro funds. All told, more than 80% of the respondents say their will boost their hedge fund investments in the third quarter, while 63% said they did so in the second quarter.

That optimism isn't likely to help long/short equity hedge funds: The Credit Suisse survey shows that more than one-quarter of investors plan to redeem some of their exposure to that strategy in the next quarter.

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