New analysis from Frost & Sullivan (financialservices.frost.com), Impact of Global Crisis on the Asset Management Industry, reveals that safer and defensive instruments are likely to be favored by investors. The markets covered in this research are the financial sector, mutual funds, hedge funds, private equity and venture capital, and mergers and acquisitions.
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The correlation between the developed equity markets will remain high in 2009. Defensive sectors such as healthcare and consumer staples are likely to be preferred. There remains a positive outlook for investments in the energy sector in 2009.
"Macro, distressed debt, and long-short strategies for hedge fund investments are likely to be favored in 2009," says Frost & Sullivan Research Analyst Kavitha Chakravarthy. "However, the hedge funds industry may witness higher regulatory control, tighter cost control, and consolidation in 2009."
The commodity-trading advisor (CTA)-managed hedge fund strategy performed well in 2008, with a return of 25.8 percent, followed by macro with a return of 7.9 percent in the same period. Market participants in the asset management industry are likely to focus on portfolio consolidation and operational value creation in 2009.
Low investor confidence and decline in equity markets restrain the market. Lower absolute returns in 2008 add to the challenges in the recovery of the global asset management industry.
Investor confidence is low due to the decline in global equity markets. The Morgan Stanley Composite Index (MSCI) declined by negative 43.1 percent in 2008, primarily due to distressed selling and tighter liquidity conditions. There were massive redemptions in mutual funds and hedge funds in 2008, with absolute negative returns for investors. This resulted in investors preferring safer investments such as treasury bills.
"Large stimulus packages announced around the world, huge cash surpluses with private equity (PE) and venture capital (VC) funds, and healthy initial public offering (IPO) pipelines are expected to create investment activity in 2009", remarks Kavitha Chakravarthy. "However, investors are likely to prefer defensive sectors and safer instruments."
Impact of Global Crisis on the Asset Management Industry is part of the Financial Benchmarking in the Asset Management Industry subscription, which also includes the following research: 130/30s - Analysis of Active Extension or Short-enabled Investment Strategies; North American Outcome-Oriented Funds: Lifecycle Funds - Investment Analysis; European Green Investments Market; Indian Asset management Industry; and Japanese Asset Management Industry. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.
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