PRINT THIS PAGE Economic outlook gloomy, say hedge fund managers21/05/2008. Source: Kinetic Partners.
A survey of more than 70 US hedge fund managers and their advisors found that most have a broadly pessimistic view on the prospects for the US economy in 2008, say Kinetic Partners. - Three-quarters believe the Dow Jones Industrial Average will show negative returns in 2008
- Eighty percent believe US economy will be stagnant or in recession at the end of the year
- Vast majority believe Federal Reserve will keep a tight rein on interest rates
The sample, polled by Kinetic Partners, which provides professional services to the asset management industry, found that most hedge fund managers believe the US stock market will continue to show patchy, uneven performance for the rest of the year.
Nearly three quarters believed the Dow Jones Industrial Average will end 2008 at no higher than 12,500 points, lower than the level at which it started the year. More than one-fifth were very bearish, saying that the index would end 2008 at about 10,500 points, a loss of 3,000 points for the year. A quarter, however, believed the DJIA will gain ground, ending at about 14,500 points by the end of 2008.
Respondents believed that economic conditions will force the US Federal Reserve to keep a tight rein on interest rates, with 90% believing that the base lending rate will end 2008 at either 2% or 2.5%. Nearly half opted for the latter figure of 2.5%, suggesting they believe that the Federal Reserve will raise interest rates in the course of the year from their current position of 2%.
The survey found that most hedge fund managers have a pessimistic view of the US economy, with more than 80% saying that US economic growth by the end of the year will either be negative or stagnant.
One third believed that the US economy would be in recession, while nearly half said the US would show neither positive growth nor recession. Nearly one-fifth said the US economy would be showing clear growth.
Julian Korek, a Member of Kinetic Partners, said: "The hedge fund industry has suffered hard in the credit crunch, as asset values tumble and prime brokers put a choke on new financing. Our survey suggests that the US hedge fund community sees no light at the end of tunnel, and that the slowdown will continue.
"Investment fund managers are looking for new ways to create positive returns. We have seen a large increase in the number of funds looking to cash in on distressed situations whether there be sub prime debt, litigation finance or turnaround operations. 2008 is set to be a tough year for many."
Kinetic Partners is a global professional services firm providing audit and assurance, tax, regulatory risk and compliance, corporate recovery and forensic services to the investment industry. Launched in 2005 as a viable alternative to the 'Big Four' and a one stop shop for clients wanting in-depth industry expertise, we are a true global partnership structure offering a seamless and bespoke service. Kinetic Partners operates out of London, New York, Dublin, the Cayman Islands, and Geneva. www.kinetic-partners.com
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