A survey of the world’s leading hedge funds by independent hedge fund research and advisory firm Aksia, has found that 42% of hedge fund managers see potential for a default or restructure by Italy and Spain.
Conducted over recent weeks, the survey of 125 institutional calibre hedge funds representing approximately USD800 billion of assets under management (more than one-third of total hedge fund industry assets) also shows 60% of hedge fund managers see a similar prospect of Greece leaving the Euro and 65% think EU member states may issue Eurobonds.
Some 94% of managers call for further monetary easing by European authorities in the survey while 80% believe the US Federal Reserve’s ‘Operation Twist’ will ultimately fail to impact financial markets. The survey also highlights that hedge fund managers hold more bearish views on global and Chinese GDP growth than 2012 International Monetary Fund forecasts.
The survey also found that the Federal Reserve and emerging market central banks garner a “B” grade on their handling of the financial crisis while US and EU leaders receive near failing grades. Most hedge fund managers meanwhile see new financial regulations as “irrelevant” to their strategy, with 21% believing they will help rather than hinder their strategy.
High correlations are not bad for all with 32% of hedge fund managers seeing “great opportunities” in this environment.
Hedge fund managers also expect markets to remain rangebound over the next 12 months, driven by macro factors rather than fundamentals. Global Macro is predicted to be the best performing strategy. 400 basis points meanwhile, is a common level at which managers with CDS spreadtriggers begin moving prime brokerage balances away from counterparties.
The survey has also revealed a generational shift in industry transparency with 26% of funds under 2 years old providing full portfolio disclosure, compared with 9% of funds over 10 years old. In addition 54% of managers send position level data to third party risk aggregators.
Jim Vos, CEO and Head of Research at Aksia, says: “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.”