Posts Tagged ‘Risk Arbitrage’

What Hedge Fund Strategies will be the best in 2008?

Friday, May 30th, 2008

As we get ready to enter the last month of the first half of 2008, I find myself trying to determine which Hedge Fund Strategies will end 2008 not only up but be the top performers. 

Presently there seems to be a few strategies that are positive for the year (at least up until May 1st the most accurate recent numbers I can find); such as Risk arbitrage and Managed Futures.  But the majority of strategies are down for the year. 

As I look over the different strategies there are three which I believe will be up by the end of the year:

  1. Industry focused Long/Short Funds
  2. Event Driven
  3. Credit Arbitrage

 

I will be the first one to admit that most people feel some of these strategies will have a strong second quarter such as a Financial Services focused long/short strategy and a Credit Arbitrage strategy.  But what sets my opinion part is that although I believe that Financial Services focused long/short funds will have a strong year, I believe that some other sectors will be even stronger. 

Event Driven funds may surprise many investors in the second half. I believe these funds will perform very well because as the credit crisis resolves itself all of the money that is on the side lines will be put to work to purchase solid assets at a significant price reduction from only a year or two ago. This money includes Private Equity and Hedge Funds as well as corporations who are looking to grab market share for a fair value.

 

Also, I believe Credit Arbitrage may become the hardest place to make money simply because so much money will be chasing after so few deals.  But if you are invested with a well connected proven player in this strategy I believe you could have a very strong return year, even though the risk is still very high.

We still have a long time 7 months until 2008 is over and who knows what the second half of the year will bring, but I know I am excited to watch. What strategies do you think could be money makers in 2008?