14/06/2010 Author: Shannon Hawthorne

HSBC Private Bank remains confident about hedge fund prospects

HSBC Private Bank has maintained an overweight position in hedge funds in 2010, following its decision to reduce its exposure to risk in global equities in April.

The bank, which is in the top three global hedge fund providers, believes that hedge funds are well-positioned to benefit from the current market volatility and is optimistic about the outlook for the industry over the coming 12 months.

“In contrast to the majority of 2009 in which investors were rewarded for taking on risk, we believe 2010 will be a rather different environment – a year of differentiation where equity and bond markets are likely to be lower than they have been since March 2009,” said Fredrik Nerbrand, head of global strategy at HSBC Private Bank.

“Therefore, it will be more difficult for investors to make money just by being 'long'; other strategies need to be implemented to increase expected portfolio return,” he continued.

The bank identified discretionary macro as its highest conviction strategy, with the “dispersion in the timing of interest rate moves between the emerging markets and the developed world”, and the “potential divergences within the Eurozone” expected to created long-term trading opportunities for the strategy, according to Peter Rigg, head of Alternative Investment Group at HSBC.