Tara Hedge Fund Barometer Reflects Growing Confidence In Macro Funds

by Phillip Morton, Investors Offshore.com

22 February 2007

In a dramatic turnaround in sentiment, investors surveyed by Tara Capital have boosted their planned allocations to Global Macro funds, while confidence remains high for Emerging Markets hedge funds, the hedge fund advisory firm has announced.

Geneva-based Tara Capital has just released the results of its fourteenth installment of the quarterly Hedge Fund Strategy Barometer (HFSB). The Barometer’s findings are based upon the plans and opinions of some of Europe’s largest hedge fund investors, with $86.5 billion of assets invested in hedge funds.

According to the survey, investor appetite for Fixed Income has significantly weakened, with 33% of respondents planning to reduce allocations. Convertible has recovered from its dark days of 2004, with a third of those questioned planning to increase their allocations, and not one respondent planning to reduce.

Multi Strategy funds, which invest across a range of opportunities from distressed equities to merger situations, polled very well within the Event Driven sector, with a quarter of investors planning to increase their allocations.

Support for Emerging Markets funds is strong, with a particularly high level of interest for funds dedicated to the Asian region. In stark contrast, some investors have turned cautious on Japan. 2006 was a pretty poor year for Japanese hedge funds, hence the degree of investor concern, Tara explained.

“Small caps in Japan got crushed last year and many funds had a large exposure to these companies. However other investors are viewing the recent turbulence as a healthy buying opportunity for Japan in general and Japanese focused hedge funds in particular," observed Cyril Delamare, Managing Director of Tara Capital.

Tara Capital also noted a sharp change in sentiment for Global Macro, following autumn’s reversal. However according to Delamare, behind the bullishness for the strategy probably lies an element of overall investor caution. “A number of the more seasoned Macro managers that we speak with have chosen to take a lot of risk off the table in order to be hedged against a significant markets decline,” he stated.

Conversely, investors have turned bearish on the CTA and Managed Futures sector. 92% of respondents have either given up or are keeping their current allocations to Managed Futures/CTA, while no-one is planning an increase.

Of the recently introduced new alternatives, interest in Energy Trading is very strong, with 33% planning to increase their allocations in the first quarter of 2007.

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