Hedge funds expected to outperform bonds, stocks in 2010

Hedge funds will likely outperform bonds and potentially equities in 2010, Swiss private bank Union Bancaire Privee (UBP) said, adding it was keen on emerging market equities. It also said the alternative asset management industry was becoming proactive again and generating positive performances.

"(We) expect hedge funds to outperform bonds and potentially equities ... as available credit and equity risk-premiums shrink," a recent note from the bank quoted Christophe Bernard, the bank's chief investment officer in charge of strategy, as saying.

The world's approximately 8,000 hedge funds have rallied from last year's heavy losses, when the average fund fell by 19 percent as share markets tumbled and investors pulled out. [ID:nN12146556]

UBP said that economic trends would be the main drivers of its investment strategy next year and that it would be overweight on riskier assets such as emerging market stocks and bonds while monetary policy remained loose.

"Emerging markets' equities still seem preferable to bonds, but blue chips and defensive names are increasingly appealing. Whilst a depression has been averted, some other extreme risks are being generated by the drastic reflation policies," the bank said.

-Reuters