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Banking

Hedge funds: defaults, restructuring and Greece leaving the Euro

It looks like the hedge funds are eyeing up a potential default or restructure by Italy and Spain, while most see Greece leaving the Euro, according to a new survey.


So it looks like the hedge funds are not so confident about the sovereign debt crisis either.


According to a survey by Aksia, an independent hedge fund research and advisory firm, 125 institutional-calibre hedge funds representing approximately $800 billion of assets under management (more than one-third of total hedge fund industry assets):



- 60% of hedge fund managers see a similar prospect of Greece leaving the Euro 
- 65% think EU member states may issue Eurobonds.
- 94% of managers call for further monetary easing by European authorities in the survey
- 80% believe the US Federal Reserve’s ‘Operation Twist’ will ultimately fail to impact financial markets.



Oh and it gets better.




42% of hedge fund managers see potential for a default or restructure by Italy and Spain.


But being hedge funds, of course, wherever there's impending catastrophe, there's money to be made:




• Most hedge fund managers see new financial regulations as “irrelevant” to their strategy – 21% believe
they will help their strategy.

• High correlations are not bad for all - 32% of hedge fund managers see “great opportunities” in this
environment.

• Hedge fund managers expect markets to remain range-bound over the next 12 months – driven by
macro factors rather than fundamentals. Global Macro is predicted to be the best performing strategy.

• 400 basis points is a common level at which managers with CDS spread-triggers begin moving prime
brokerage balances away from counterparties.

• Generational shift in industry transparency: 26% of funds under 2 years old provide full portfolio
disclosure – against 9% of funds over 10 years old.

• 54% of managers send position-level data to third party risk aggregators.


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