Tara Capital Reports Swing To Global Macro Hedge Fund Strategy

by Carla Johnson, Investors Offshore.com

06 January 2006

Geneva-based hedge fund advisory firm Tara Capital reports that investors are planning to increase their allocations to Global Macro managers.

The prediction is included in the newly released results of Tara's tenth instalment of the Hedge Fund Strategy Barometer. Tara's Swiss office conducted the survey from December 5th – 12th 2005. In total, 27 European hedge fund investors with a combined $71 billion invested in hedge funds participated.

“With overall returns being relatively muted from the hedge fund universe in 2005, professional hedge fund investors are feeling the pressure to take on more risk, hence the shift back towards the Macro area,” commented John Lowry, founder of TARA Capital.

Convertible Arbitrage continues to be unpopular, says Tara, with not one respondent willing to increase their allocations. In contrast however, the results for Equity Market Neutral were very positive with 44% of investors reporting that they will be raising their exposure. Between these two extremes, Fixed Income funds have risen in popularity as compared to the results from the autumn survey.

Multi-Strategy, traditionally a very popular choice, has been in decline of late whilst the latest Barometer also reveals that the distressed sector remains out of favour. There has been a strong turnaround in the fortunes of Merger Arbitrage managers. This sector, which had been shunned by investors in 2004, has been consistently popular during 2005. The results indicate that 39% of respondents plan to increase their allocations.

Lowry said “The fundamentals look very promising for takeover activity, particularly in Europe with a lot of corporate and Private Equity money looking to get involved, hence the strong turnaround in demand for managers specialised in this sector.”

Over the course of the Barometer there has been a steady decline in the popularity of US Long Short. However, European investors now appear to be on the lookout for great US equity talent, with 44% of respondents planning an increase.

In contrast three equity strategies did see a decrease this quarter, namely Global, Emerging Markets and Japan. Following a generally very good year for European managers, there is a slightly disconcerting lack of consensus on the European Long Short space this quarter. While 39% of respondents are planning to increase their investments, it is very interesting to see that 25% indicated that they will be reducing their allocations. This is a record for the HFSB for the sector.

The demand for Global Macro managers remains very strong. “In a year when many big, well known Macro managers struggled, it is interesting to see that the demand for the strategy is strong, with 61% planning an increase and not one respondent planning a decrease.” noted Lowry.

The demand for managed futures and CTA’s continues to be relatively weak.

TARA Capital is an investment research and advisory firm dedicated to the alternative investment industry.

Recommended