Developing markets ideal for hedge funds

Date: Tuesday, August 26, 2008
Author: Gulf Daily News.com

MANAMA: Developing markets are fertile ground for hedge funds, if the funds have experienced managers, according to Paulson and Company founder and chief executive officer John Paulson."Underdeveloped markets are less efficient and create more opportunities," Mr Paulson said in an interview in the forthcoming issue of The Report Bahrain 2008.

"In markets such as London and New York, which are very efficient, the arbitrage opportunities are very thin. However, in developing markets, the arbitrage opportunities are greater. A developing market could benefit from an experienced manager who is able to navigate the market to create value for investors."

He outlined many of the hedge fund strategies, and pointed out that, for GCC hedge funds, underdeveloped debt markets should not pose an obstacle as hedge fund managers can focus in the areas where there is sufficient liquidity.

Mr Paulson said that, with the hedge fund sector among the fastest growing industries in the world, there was a demand from many investors from outside the Gulf region to diversify and invest in promising areas of the world.

"Recently, some of the highest returns in the industry have been in emerging markets," he said.

"So hedge funds that focus on the opportunities in the GCC should be able to attract investors from not only within the region, but also from other regions of the world."

Investors, he said, are looking to deploy capital in high return strategies that are run by people with an information edge in the local markets.

"The market itself can be immature, but the hedge fund manager must be experienced," he said. "If so, the fund can succeed in an immature market."

The interview with Mr Paulson is one of a series of exclusive interviews with key officials and business leaders in what is considered the most extensive, independent, unbiased and authoritative review of Bahrain available.

The Report Bahrain 2008 is published in partnership with primary partner, the Bahrain Economic Development Board, Securities and Investment Company (SICO as capital markets partner, Ernst & Young as accountancy partner, and Qays H Zu'bi as legal affairs partner.

Available in print form and online, it is part of the range of Oxford Business Group's publications, which are renowned as leading sources of information on developing and emerging economies around the world.