Hedge fund managers are predicting financial markets to be more volatile and, thus, afford them more opportunities for improved investment returns in 2014 according to articles in Pension & Investments 2014 Outlook report.
Central bank intervention from the Federal Reserve, European Central Bank and Bank of Japan has kept interest rates low and caused equity prices to rebound impressively in 2013. Their policies, along with the US budget accord and a recovered housing market, will continue to help the world economy to strengthen. This will give investors confidence to pursue more risky assets such as emerging markets and small cap stocks.
According to Lee Ainslie of Maverick Capital, equity long/short will have better performance as the correlations between securities' returns will be lower. Managers relying on fundamental analysis of corporates will have their positions less influenced by macro economic factors. Other hedge funds are looking at complex strategies for returns. Farallon Capital is investing in distressed European debt, event driven equity in merger arbitrage and US commercial real estate. They are buying foreclosed properties and flipping them to other investors after rehabilitating and finding renters for them. DW Investment Management will continue to hold positions in single corporate credit securities, structured corporate credit, residential and commercial mortgage backed securities and student loan backed instruments. Magnetar Capital will invest in the US energy build out caused by the explosion of hydraulic fracturing.
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