With the long term outlook for global equity markets still uncertain, South African investors should instead be looking offshore to profit from the expected volatility and mispricings in several regions and asset classes, says Kevin Ewer, portfolio manager at Blue Ink Investments…
There are many potential offshore opportunities for South African investors to consider, but in order to take advantage of these opportunities, they need to maintain exposure to diversification strategies such as hedge funds and other asset classes that offer a degree of protection in times of market turbulence and which can exploit mispricing opportunities.
While one would expect that the Greek debt crisis would provide opportunities for hedge funds to exploit, the reality is that the easy money has already been made and it is increasingly difficult to identify worthwhile trades. In this regard, Spain, Portugal and even France are looking more attractive at the moment.
There is also a lot of uncertainty, and therefore opportunities, for hedge funds in emerging markets, including Latin America, Eastern Europe and Asia. Take China for example. While the West sees it as a growth story, investors in Asia are very concerned about issues such as wage pressures and the effects these could have on the economy.
In the current environment, it is important to find managers who understand their respective markets and can identify and exploit opportunities when they present themselves. These managers should be able to manage their long term view for short term profitability.