2010
Emerging markets?
Filed Under (Hedge Funds) by Admin on 03-02-2010
Emerging market for alpha? Good hedge funds had a great decade as usual and many emerging markets also did well. Ten years ago most investors avoided developing countries and loved developed because of the Asia crisis, Russia default and 1990s bubble. When will the crowd learn to buy the unpopular and short sell the trendy? Not yet judging by the money swarming into long only emerging market debt and equity funds. Like developed markets, emerging countries offer alpha capture opportunities from long/short security selection, arbitrage and timing NOT buy and hold beta.
Lost decade? I ended up with an +18.59% CAGR after fees for the 2000s. Not bad considering the high manager diversification and low market risk. I choose alpha vendors for most strategies but manage some special situations myself if I have an edge. I use macro black boxes and micro risk metrics that seem to have predictive value. Emerging markets alpha is a favorite strategy. One year ago AND ten years ago many experts said avoid “risky” emerging markets and “dangerous” hedge funds! Financial science is not rocket science; it’s more complicated than that. I focus on robust models and geographic FACTS not economic THEORIES. I just strive to be long only of alpha.