Fund of hedge funds manager International Asset Management says Asian and emerging markets are providing the best growth opportunities for long and short equity managers.
The firm says economic growth in Asian and emerging markets is expected to be faster than developed markets. It also notes that some emerging market currencies are reaching their highest levels for years and currency volatility remains higher than average, which can provide opportunities for macro managers.
IAM says the recovery in developed markets is not strong enough for interest rates to rise but it is not weak enough to prevent earnings’ growth. The firm says low interest rates are allowing companies to borrow cheaply and that the US is at the head of the recovery among developed regions.
IAM believes the second round of quantitative easing in the US is likely to increase investment in emerging markets and boost equity markets in general. It considers equity valuations are reasonable and that market inefficiencies are creating good investment opportunities for long/short strategies.
Chief executive Morten Spenner says: “We continue to favour managers with a variable bias within the strategy because of a preference for managers that are nimble and flexible in market conditions that are likely to change. Trading-orientated managers should also perform well.”