Hedge funds to steal market share

Fund managers say the growing number of hedge funds will take market share from traditional funds according to the latest Morningstar European Funds Trends survey.

Morningstar.co.uk Editors 9 July, 2004 | 4:40PM
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Some 54% of managers surveyed said hedge funds would encroach on traditional managers’ territory at least to some extent while 4% said they would a lot. Hedge fund activity has been booming recently. Over half of the survey participants already offer in-house hedge funds while 50% plan to launch new hedge funds in the coming year.

Fund managers were split as to whether hedge funds offered investors sufficient rewards to compensate for their higher fees. Some 36% said it was doubtful while 10% said that investors pay too much to hedge fund managers.

Overall managers have tempered their expectations for the performance of the gl

obal stockmarket, as measured by the MSCI World index, in the next year. Some 70% said they expected returns of 5-10%, up from 59% in May. Only 14% said 10-15% returns, down from 25% in May.

Top markets

Japan was expected to be the best performing market over the next year. Some 44% chose Japan with Europe excluding the UK coming a distant second with 21%. Asia excluding Japan, which had topped the regional preferences for a number of months until recently, came in third with 14%. Overall, managers said America would be the worst performing region with Britain and Latin America following.

In terms of currency the yen and the euro were the most favoured. Almost 40% of managers said the yen would be the best performing currency over the next 12 months while 32% chose the euro. The dollar is by far expected to be the worst performing.

Meanwhile managers said larger companies would outperform their smaller counterparts. Only 7% said small caps would be the top performer over the coming year while 61% favoured large firms. Managers were split when it came to whether growth or value would be the top investment style. Just over 30% said growth while 22% said value and the rest were neutral.

Morningstar’s European offices conducted the survey from June 14th-21st. Some 58 fund groups from 12 countries participated. On average they each managed €54billion (£36 billion) and offered 92 retail funds.

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