2010 likely to be more testing for hedge funds

Hedge funds making big bets on currencies, commodities and equities are favoured by fund selectors in what is likely to be a more testing 2010 after a bumper year for hedge fund returns, it is claimed.

While 2009 was characterised by buying riskier assets rebounding from last year's depressed prices, managers believe that 2010 will not see such large price rises.

Many fund managers think countries will emerge from the global downturn at different speeds... Managers believe this presents a perfect opportunity for global macro funds, which bet on currencies, interest rates, commodities and stocks and which were made famous by firms like billionaire George Soros's Soros Fund Management.

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However, among large investors and industry consultants the sense is that savvy investors are now backing out of their bets on credit that earned them so much money this year. ‘I get the sense that investors are moving from one manager to another,’ said Thomas Lynch, managing director at Cliffwater, a consulting firm which advises pension funds.