Reuters: Hedge fund bosses cautious ahead of Monaco summit

Reuters: Hedge fund bosses cautious ahead of Monaco summit
By Laurence Fletcher
MONACO | Mon Jun 20, 2011 7:11pm EDT

(Reuters) - European hedge funds' top executives will be in cautious mood this week as they gather in Monaco for their annual summit, after big losses in May took some of the shine off a year of inflows and strong returns.

Bosses such as Man Group (EMG.L) CEO Peter Clarke, whose firm is finally enjoying clients inflows, Centaurus chairman Bernard Oppetit and commodity manager Armajaro's co-founder Anthony Ward will discuss how to get the industry back on track.

Hedge funds lost 1.2 percent in last month's commodities rout with big-name funds such as Aspect Capital's Diversified fund and Crispin Odey's European fund losing more while many funds, wary of further losses, are keeping their bets small.

"The last couple of months have been difficult. May wasn't a catastrophe, but it was a difficult month," Chris Barrow, global head of sales for prime services at HSBC, told Reuters.

"From the hedge fund managers we talk to, many have low levels of conviction. There's still a lot of uncertainty about where and how to make money."

Barrow says leverage, a key measure of risk-taking, is between 1 and 1.3 times -- below levels seen recent years for equity long-short funds.

While hedge funds posted double-digit returns in 2009 and 2010, many are still scarred by 2008's losses of nearly 20 percent and the memory of investors pulling out nearly $300 billion during the crisis, according to Hedge Fund Research.

"Given the legacy of 2008, there's a lot of risk aversion," said Savvas Savouri, chief economist and partner at London-based Toscafund. "Getting it wrong would be very costly."

OPPORTUNITIES

New client flows into hedge funds fell to the lowest level in two years last month, according to GlobeOp, after oil lost up to $13 a barrel at one point on May 5 and silver fell 12 percent the same day, hurting many computer-driven funds.

Nevertheless, managers are more upbeat than last summer, when funds had just lost 2.9 percent in May 2010, and many in Monaco will be hoping for a repeat of the 9 percent rally seen in the final four months of last year.

"In the last quarter of last year a lot of strategies performed quite well," said Thomas Weber, chief investment officer for hedge funds at LGT Capital Partners.

"May was, of course, a challenge, but we're expecting that this could be a good year again. There are interesting opportunities that could be exploited."

Several conference sessions in Monaco will focus on the outlook for commodities after May's sell-off, and celebrity investors like as Better Capital's Jon Moulton and Eclectica's Hugh Hendry will debate where the so-called "smart money" is going.

While funds are wary of betting on market moves, some have raised gross exposure -- the sum of long and short bets -- in a sign they see opportunities to make money in overpriced or cheap stocks, said Jeff Holland, co-founder of fund of hedge funds firm Liongate.

Elsewhere, big pension funds, many of which have bypassed funds of funds since the crisis and are picking hedge funds themselves, will debate whether small, boutique funds will perform better than well-established funds with big brand names.

And executives from Amundi and Gottex will discuss the growth of managed accounts -- portfolios where the client still controls the assets -- which are designed to let the client exit when they want and protect against a Bernard Madoff-style fraud. (Editing by Chris Vellacott and David Cowell)