HSBC sees macro hedge funds profiting from Libya crisis

Date: Thursday, March 10, 2011
Author: Laurence Fletcher, Reuters.com

Hedge funds that bet on interest rates and currencies are set to profit from the economic fallout from Libya's unfolding crisis, says HSBC Alternative Investments, which has already benefited from rising oil prices.

The uprising in Libya, the bloodiest in a tide of pro-democracy protests in North Africa and the Middle East, has already helped push up the price of Brent crude to its highest since 2008 last month.

Certain strategies such as global macro -- made famous by managers such as billionaire George Soros -- and computer-driven trend-following funds have already profited with gains of 1.29 percent and 1.59 percent, respectively, in February, according to Hedge Fund Research, helped by energy and commodity bets.

HSBC AI, which runs funds of hedge funds, is positive on macro funds -- which bet on moves in currencies, interest rates, commodities and stocks -- and thinks they may profit further if the North Africa crisis hits global economic growth.

Such an event could cause central banks to cut or delay raising interest rates, providing a range of new opportunities for these funds.

"Macro and trend-followers are making a bunch of money," said Peter Rigg, global head of the alternative investments group, at a press briefing on Tuesday.

"If the situation persists, then the effect on growth and the response of central banks will be very interesting. Macro managers should be very well placed, and interesting opportunities will come out of it."

While hedge funds made a range of bets on Europe's sovereign debt crisis last year, many have shied away from taking positions on the North Africa turmoil for fear of being 'whipsawed', or betting on a market move only to see it immediately reverse.

However, HSBC AI said it has already profited from funds that bet on volatility or market trends.

"Our managers are generally making good money from the situation," said Tim Gascoigne, global head of portfolio management.

"One example is volatility; when you get volatility you can generate good returns. Volatility and trend-followers are making money in these conditions."