Credit Suisse hedges bet for bumper 2007

Date: Tuesday, February 27, 2007
Author: Madeleine Collins, Investor Daily

Hedge funds poised for record year, say analysts

Credit Suisse is hedging its bets for another record year for the global hedge fund industy. 

 

Credit Suisse says 2007 will be another record year for hedge funds as the industry continues to seek positive returns.

The next 12 months should bring in assets of $1.2 to $1.4 trillion into the global hedge fund industry, over and above the $1.23 trillion in 2006, Credit Suisse's Alternative Investments managing director Oliver Schupp told Investor Daily.

"Most likely it's going to be a record year," Schupp said.

"I still think there's a lot of money coming into the industry. We have seen no negative results for most global markets."

According to the latest report from the Credit Suisse Tremont Hedge Index, The Hedge Fund Industry Rocks Both Bear and Bull Markets, despite market downturns in May and June last year and the collapse of one of the largest hedge funds in the industry - Amaranth Advisors - hedge funds continued to attract a healthy level of capital across all markets.

It said the industry benefited last year from record highs in corporate activities, a stronger than expected earnings season, a pause in US Federal Reserve interest rates, high energy prices and volatility fluctuations.

Emerging markets achieved returns of 20 per cent in 2006 - making it the industry's top performer - but Schupp warned against over-estimating its strength.

"If we were to see an abrupt change in emerging market growth in India and China it would backlash onto the US economy," Schupp said.

Australian institutional investors are driving growth in domestic hedge funds, Credit Suisse Alternative Investments Vice President Kate Wilkie said.

A lot of the money is coming from institutional clients as they are attracted to the industry's low volatility due to the broad diversification of assets and strategies and returns of between 9 to 11 per cent, Wilkie said. 

The Credit Suisse Tremont Hedge Fund Index is the world's largest asset-weighted hedge fund measurement, encompassing 439 funds. It has raised US $5 billion in assets in the past two years.