LONDON (Reuters) – UK listed funds may be struggling to raise money in the wake of the credit crisis, but funds of hedge funds could thrive in 2008 as investors hunt for returns through all market conditions.
Recent stock market volatility and a meagre 5.3 percent return from the FTSE All Share .FTAS index in 2007 have hit investor appetite for traditional funds, which tend to move in the same direction as markets. A Reuters poll in December showed equity strategists cutting their expectations for the FTSE 100 .FTSE for 2008 by 2.3 percentage points to 7.6 percent.
In contrast, funds of hedge funds have been able to make more money in this new environment, for example by investing in strategies that bet on lower prices in the subprime sector. Having returned 11 percent in 2007, they are now set to increase their share of new money flowing into listed investment funds.
"The environment is definitely tougher … (But) we see the fund of hedge funds space receiving more money … In the private client broking world, more money is being assigned to hedge funds and funds of hedge funds," Simon Elliott, investment trust analyst at WINS, told Reuters.
