Credit Suisse believes that directional strategies will likely continue to add value toward the end of the year. On the other hand, while the short-term event risk of the coming weeks is expected to set a challenging environment for the majority of hedge funds, it should be supportive or at least not harmful for global macro managers.
There are many reasons to seek non-correlated investments, even if, like fastastical creatures, they are hard to find. These investments can be highly beneficial to sophisticated investment portfolios, as they provide a great deal of diversification for the dollar.
The extended slump in the U.S. housing market has created a significant opportunity for patient investors. Given the imbalance between prices (weak) and rents (strong), investors willing to participate in a buy-hold-lease strategy have the opportunity to garner attractive current income on stabilized net capitalization rates exceeding 6%, with the potential for significant capital appreciation as the housing market ultimately recovers.
With growth slowly returning to the First World but decelerating in several emerging countries, macroeconomic managers now face different local imperatives, and a divergence in policy response is emerging. The seeming lack of policy coordination sometimes looks disconcerting. However, we are inclined to believe the various financial policy settings will turn out to be consistent with continuing economic recovery for the global economy.
Since 2008, commodities have been highly correlated with equities and other risk assets. As a result, many investors have begun to question whether the diversification benefit of investing in commodities has evaporated. A new report, however, finds that the recent spike in correlation is very much in line with the historical pattern around large macroeconomic shocks.
The prudent investor will seek to capture as many of the opportunities as might be available but will be particularly careful to define his or her real risk tolerance and need for higher returns, hopefully through a cautious evaluation of his or her individual goals and the size of the assets needed to defease them. The spectrum of possible investment stances is large, but the main focus should be on ensuring that one is in the right position within this spectrum rather than being mesmerized with short-term return opportunities.
Modern portfolio theory, while highly useful in illustrating the relative tradeoffs between current and prospective portfolio allocations, should not be used as the primary framework for constructing portfolios for wealthy families. Investors are better served, the authors say, by a goals-based approach that recognizes multiple levels of risk tolerance for distinct goals.
Earnings growth in 2Q for the vast majority of companies will likely be far below last year’s year-over-year gains. Slowdowns in both Europe and China have resulted in lower demand, to an extent, while comparisons to strong 2Q 2011 earnings results will depress year-over-year measures. We are hopeful that more meaningful earnings gains will resume in the second half of 2012.
The author discusses the re-emergence of domestic energy production, illustrates the evolving opportunities and risks brought about by this re-emergence for the United States and briefly touches on potential investment opportunities. This paper has a particular focus on natural gas, the most significant source of domestic energy.
Rental growth is likely to slow in many markets. However, low vacancies and limited construction pipelines as well as the fairly robust global economy should limit any downside in most cities. Regionally, we believe direct commercial real estate in Australia, China, Germany, France, Canada and selected U.S. and Latin American markets should outperform in the next few quarters.