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Numis backs hedges as cushion

Numis Securities expects listed multi-strategy funds of hedge funds to provide a cushion against equity market falls rather than full capital protection, as exposure to equity long/short managers means some correlation to equity markets is inevitable.

The research firm says market conditions seem to resemble those of 2008, with falls in most asset classes, high volatility and greater correlation between stocks in the same sectors.

It sees hedge funds as better equipped to survive the turmoil than during the credit crunch because they have lower levels of gearing and are not under pressure to sell assets due to redemption requests from investors.

Numis expects returns within the listed hedge fund sector to vary, depending on whether the funds follow a multi-strategy funds of hedge funds, credit or macro strategy.

Listed multi-strategy funds of hedge funds provide diversified exposure to a range of hedge fund strategies. Numis says the net asset values of these funds fell in the 2008 credit crisis, disappointing investors who had expected them to protect their capital.

It says many investors with a defensive outlook had bought listed hedge funds as an alternative to cash but discounts widened sharply which resulted in higher losses than equity markets.

Numis says many funds of hedge funds suffered losses in June to August this year and in the weak markets of May to June 2010 but substantially less than the falls in equity markets. It also points out that corporate action to manage discounts or return cash to shareholders through wind-ups may enhance the appeal of listed funds of hedge funds.

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Sub-Saharan Africa Near-Term Outlook

By Paul Caruana-Galizia, Neptune Economist

Sub-Saharan Africa’s economic renaissance continues. After growing at an average rate of five per cent over the past decade, the IMF projects an acceleration to 5.5 per cent growth among Sub-Saharan economies in the next two years, as developed economies emerge from the crisis. We expect this growth to be sustainable for three broad reasons.

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