Hedge Funds to Concentrate on Equities & Global Macro

Hedge funds utilizing strategies based on equities and macro-economic trends are expected to produce the highest returns in 2006, according to Investorsoffshore.com.

"Global macro will produce highest returns, followed by equity hedge funds," said Luis Rodriguez, head of risk management at a New York-based Family Office.

In the third quarter of 2005, hedge funds with equity long-short strategies returned 6.11%, and they still remain one of the best-performing types of hedge funds out there, with just under $320 billion in assets, according to Chicago-based Hedge Fund Research.

Global macro funds returned 3.57% in the third quarter of 2005, gaining $944 million in assets.

Separately, event-driven strategies have also become quite popular among hedge fund investors. Events like bankruptcies and restructuring of management often affect the performance of hedge funds, and with this in mind, many investors bet on these corporate events.

These types of funds gained 4.28% and pulled in $2.5 billion in new assets in the third quarter of 2005. Funds-of-funds experienced an outflow of more that $1.2 billion in assets in the same quarter.

Reuters recently surveyed hedge fund managers, and the poll revealed that they expect to post good if not great returns in late 2005, and early 2006. The greatest opportunities are in Japan, the survey revealed.

The survey polled 12 fund managers managing a total of about $76.5 billion in assets and revealed that fund managers expect average returns for the industry, particularly in the long/short equity sector. Furthermore, managers are more likely to support long rather than short-biased plays.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.