Macro hedge funds best despite May dip -Lombard Odier

* Sees strong macro trends continuing into 2011

* Volatile markets to help global macro strategy

* Consolidation looms for funds of hedge funds
By Martin de Sa’Pinto

MONACO, June 17 (BestGrowthStock) – Hedge funds taking directional
bets on markets will be among the best performers in 2010 as
concerns over the health of major economies continue to dominate
markets, said Lombard Odier’s head of hedge funds advisory.

Cedric Kohler said on the sidelines of the GAIM hedge funds
conference that strong trends in currencies, equities, debt and
commodities could help the strategy known as global macro to
prosper into 2011 despite a disappointing May.

“The overall environment has been driven by macro events in
2010, and I believe it will continue to be the case because of
economic imbalances in the largest markets,” said Kohler, whose
team at the Geneva-based private bank oversees a fund of hedge
funds and advises clients on hedge fund investments.

With markets highly volatile, he said macro managers
benefited from their ability to take long or short positions in
most markets, trade in very liquid products and change
positioning nimbly if their view of the economic outlook
changes.

“That’s not the same for all asset classes; there has been a
significant drop in liquidity in areas like credit, making it
difficult to turn around portfolios when the market moves
against you,” he said.

CS/Tremont data show global macro strategies lost 0.63
percent in May, which Kohler said was disappointing, because
such strategies should have performed well in a month when
pressure on euro zone economies triggered heavy market declines
and sent the euro into tailspin.

“The losses were caused because people were worrying about
liquidity and simplifying their trades, with many ending up in
the same trade for different reasons,” he said.

For example, he said, managers who had been short the euro
and long the Australian dollar switched into a euro-dollar
trade, which they thought mirrored their original trade and
offered better liquidity, while managers playing the Greece
theme avoided credit default swaps on worries about a regulatory
ban, and used euro-dollar trade as a proxy.

“So people were using same instruments for different
reasons, exacerbating volatility in those instruments.”

While Kohler said funds of hedge funds should thrive after a
difficult two years, he expected their numbers to fall.

“There’s going to be industry consolidation. Those funds of
funds which are too small or do not have a clear strategy will
either close or be bought,” said Kohler.

“But prices won’t be high. People won’t be buying their
strategy or their distribution, just their assets under
management,” he said.

Stock Market Money
(Editing by Will Waterman)

Macro hedge funds best despite May dip -Lombard Odier