Hedge Fund Leaders See Foresee Stronger Returns In 2005

by Phillip Morton, Investors Offshore.com

05 April 2005

After a year of lacklustre hedge fund returns in 2004, many industry leaders believe that 2005 will see a return to more steady gains by hedge funds, with some predicting returns reaching double figures.

This was the conclusion reached by the delegates at the GAIM USA conference in Florida last month, where 80% of those surveyed anticipated improved hedge fund performance during 2005, with over one-third forecasting gains above 10%.

"The survey results suggest that performance remains at the top of the list of issues for all managers - far outweighing concerns of registration, leverage or even capacity," observed Amanda Rodrigues, event director and head of research for GAIM USA, a part of Institute for International Research.

On the question of where the best returns were likely to be enjoyed by investors, almost half (48%) believed funds of hedge funds would expose investors to the best performing funds, while 17% thought that direct hedge fund investment offered the best opportunities.

"Interestingly, the results indicated there is no clear consensus on the way asset allocators are using hedge-fund strategies," noted David Katz, founding partner of Rocaton Investment Advisors, which helped organise the survey.

“For example, approximately one-third, or 32%, view their strategies as a separate asset class, while another 13% utilize portfolio alpha and 12% consider their strategies as equity substitutes,” he added.

The traditional strategies of global macro and CTA (Commodity Trading Advisor) were tipped to perform well in 2005 by 43% and 35% of the respondents respectively, although many foresaw the emergence of new hedge fund strategies focusing on such products as energy and insurance.

Reassuringly for investors, well over half of those surveyed (57%) expected hedge fund fees to decrease in the coming year.

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