TARA Capital, the European hedge fund advisory firm has released the results
of its latest Hedge Fund Strategy Barometer, which has highlighted the accelerating
shift by investors away from Convertible Arbitrage strategies and towards the
increasingly popular Global Macro strategies.
The survey of institutions with a combined $74 billion allocated to hedge funds
is intended to show how asset allocations move across the primary hedge
fund strategies.
“The results from our latest research shows that investors in hedge funds
continue to shun one of the traditionally most popular hedge fund strategies,
Convertible Arbitrage while there is a big swing back towards fundamentally
based Global Macro managers," commented John Lowry, CEO and founder of
TARA Capital.
According to the survey, not one respondent indicated they were willing to
increase their allocations to Convertible Arbitrage while 89% of respondents
are planning to decrease their investments in the strategy. This represents
the biggest negative score ever recorded by any strategy since the launch of
the HFSB one and a half years ago.
“These results would appear to suggest that the whole viability for the
convertible strategy is in serious doubt," observed Mr Lowry, although
he did not rule out the possibility of a recovery, noting the strategy may be
near a "historic low."
Big winners in the relative value sphere this quarter were Fixed Income Strategies,
which experienced a sharp rise in popularity.
Multi strategy, traditionally one of the most popular of the stategy groups,
continues its rise in popularity with 67% of respondents planning an increase.
By contrast, the popularity of distressed strategies continues to fall, while
demand for merger arbitrage funds is on the rise.
Interest in Global Long-Short funds appears to be waning, with TARA noting
that interest levels have halved. By contrast, US Long-Short equity is an area
of growing interest although a significant minority also plans to decrease allocations.
However, European and Emerging markets Long-Short funds continue to see strong
investor support.
Meanwhile, Managed Futures/CTA strategies are continuing to increase in popularity,
with 33% of those surveyed planning an increase. This quarter’s results
also show very strong interest in Global Macro discretionary managers with 63%
of respondents planning an increase to the sector as investors expect an increase
in market turbulence.
TARA concluded that the latest barometer confirms the view that many investors
are "losing faith" in certain strategies and managers and that many
are now placing more emphasis in quantitative analysis to select managers.
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