Hedge funds to 'capitalise upon volatility'

Fri, 14 Dec 2007

Although the hedge fund sector typically suffers during periods of financial volatility, distressed assets may provide significant opportunities for investment, one expert has claimed.

Francois Barthelemy, partner at F&C Partners, said that "well-managed" portfolios tend to "recover quickly" after periods of market turmoil when the market returns to "rational pricing of assets".

According to the expert, the sub-prime crisis has created a number of opportunities for hedge funds, with banks and insurance companies currently recording high levels of "impaired" credit assets.

Mr Barthelemy also suggested that the losses made by these institutions have limited their ability to write new business .

"The solution requires the raising of fresh capital and the selling of impaired assets to investors who will have the ability to work them through bankruptcies or restructuring," he commented.

At present, only hedge funds have the legal and investment knowledge to purchase such assets and will be successful, he claimed.

In related news, a recent survey conducted by Barclays Stockbrokers revealed that 79 per cent of investors aim to make their investment portfolios diversified.
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