There is definite proof that sustainability-focused funds are outperforming their conventional counterparts. But some experts believe the traditional explanations for this are wrong.
At Hong Kong's GAIM conference, the audience was given proportional representation in a session hosted by AsianInvestor's Jame DiBiasio. Via electronic polling, the audience reacted to a number of questions about the credit crunch, investment opportunities and politics.
Scrutinising the results and adding their two cents worth was a panel of wise elders from the alternatives community: Kirby Daly, head of sales and capital introductions at Newedge Group; Ed Rogers of Rogers Investment Advisors; and Jonathan Field of the hedge fund administration wing of HSBC.
Acting on the notion of the wisdom of crowds, this experiment in democracy brought forth:
Best/most profitable growth for hedge funds in 2008
Greater China, 29.2%
The panel says:
Daley: "I think Asia-ex-Japan is going to hit road bumps this year"
Rogers: "This selection represents the best of the worst"
Best performing Asia ex-Japan strategy this year?
Equity long/short, 21.5%
CB arbitrage, 9.2%
Stat arbitrage, 3.1%
Merger arbitrage, 3.1%
Field: ôThere's a lot more volatility in addition to what's already come. However, as an administrator long/short is a gift.ö
Rogers: ôA lot of allocators come here looking for long/short, but this is going to be a great year for [volatility] hedge funds like Artradis.ö
DiBiasio: ôAs AsianInvestor wrote at the beginning of this year, æViva VolatilityÆ.ö
What will be the total size of global write-downs associated with the subprime crisis?
$250 billion, 4.4%
$500 billion, 35.3%
$ 750 billion, 25%
$1 trillion, 14.7%
More than $1 trillion, 20.6%
Field: ôA trillion û itÆs a load of money but weÆll get away with it."
Rogers: ôI go with a trillion too û this smells worse than the savings and loans crisis did.ô
Daley: ôStay away from financials for a very long time. WeÆre nowhere near finished.ö
How long will the crunch continue?
3 months, 4.1%
6 months, 13.5%
1 year, 50%
More than 2 years, 32.4%
Rogers: ôIt's not till we hit rock bottom that we figure out how long this will take to work out. When Warren Buffett decides to buy an investment bank with his $35 billion in cash, that will be a good sign.ö
Daley: ôI donÆt think housing will bottom out in the US till 2009, and that needs to happen before recovery. The FedÆs recent move to help broker/dealers was important. Someone told me it was an 'effing good trade' to swap subprime into Treasuries."
Best currency returns over in next 12 months?
Field: ôThe trend is going to continue with the RMB, and that will help the West.ö
Rogers: ôSooner the RMB floats the better. The world needs China's liquidity.ö
Which asset class will generate the best returns in the next 24 months?
Brics equities, 23.1%
US Reits, 4.6%
US financial stocks, 24.6%
Global credit, 18.5%
Global private-equity buyouts, 10.6%
Asia funds of hedge funds, 18.5%
Rogers: ôJapanese funds of funds would be my number one; in two years time there will be significant rebound in financials û but they may not bottom for another 12 monthsö
Daley: ôBrics equity benefited from the liquidity over several years, and that now has to be paid back.ö
Field: ôI voted for Asian credit. People we talk to canÆt wait to get stuck in.ö
Japan is going to become:
A vital integrated part of North Asia growth story, 27%
Switzerland û old, rich, stable, aloof, boring, 49.2%
Shorn of working age people, an economic satellite of China, 23.8%
Daley: ôThe only thing that can save Japan is if there is a sea change, and the reform element split from the existing political parties.ö
Rogers: ôItÆs a $5 trillion economy. To think it will become irrelevant is plain silly.ö
Will pollution drive hedge funds from Hong Kong?
The next president of the United States will be?
Hilary Clinton, 12.5%
Barack Obama, 54.7%
John McCain, 26.6%
Ron Paul, 3.1%
Al Gore, 3.1%
Rogers: ôI think so much damage will be done in the Democrats' camp that McCain ends up becoming president.ö
Field: ôObama. In the UK we get all this over within three weeks. Last year the UK changed its government and didn't even have an election. The other day, I phoned into a talk radio station to complain about how people were going on and on and on..."
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