Hedgies More Bullish Than Bearish

Dec 10 2012 | 9:14am ET

Bullish hedge fund managers outnumber their bearish counterparts three to one according to a new survey from Aksia.

The research firm polled 168 “institutional caliber” managers collectively responsible for managing about $900 billion and found them “bullish on financial assets, comfortable with the stability of financial markets, and though clearly uncertain on outcomes, less sensitive to the impact of macro/political risks.”

Managers are especially bullish on emerging markets and gold which are expected to deliver the strongest performance in 2013. More than a third of the managers polled expect double-digit returns from these asset classes.

A full 88% of respondents said the U.S. housing market had bottomed while only 52% expect a large-scale sell-off of assets by European banks (compared to 83% a year ago).

Managers are also less worried about counterparty risk—CDS spread triggers are decreasing in importance for hedge fund managers with only 36% of managers reporting their use (versus 50% last year) and existing trigger levels are higher.

Aksia says managers are “reasonably optimistic” on European equities with 63% predicting positive performance in the EuroStoxx 600 in 2013 and 25% expecting returns in excess of 10%.

Pension funds are exerting significant influence, with 68% of managers listing direct allocations from pensions as the fastest-growing part of their AUM. Funds of funds, on the other hand, are waning, with 63% of managers reporting cuts in their FoF allocations.

Said Aksia CEO Jim Vos in a statement:  “This survey appears to show that managers are looking through much of the 'noise' and headlines that bombard us daily.  At a minimum, it illustrates a belief in near term stability in the markets and less concern about left-tail risks.”


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