Hedge Funds Emerging Markets
Hedge Funds Look to Emerging Markets for Rate Simplicity
Hedge funds are increasingly looking to emerging markets in order to profit off currency and bond bets. Managers are now of the belief that there are better opportunities in emerging markets than developed markets especially when it comes to rate simplicity.
Hedge funds believe more predictable monetary policy in emerging markets is making it easier to profit from bond and currency bets there than in developed markets. Central banks in emerging markets face a classic trade-off between inflation and growth, the funds say, in contrast to policymakers in the U.S. and Europe struggling with rock-bottom rates and doubts about whether to restart printing presses.
Managers are confident enough about the priorities of central banks in countries like India, China and Brazil to place bets on the direction of rates.
"It's far easier to forecast what a central bank in the emerging markets space is going to do than try to forecast what the Fed's going to do or the ECB's going to do," one hedge fund manager, who spoke on the condition of anonymity, said.
"Most of the emerging market curves are not as well traded, there are many more discernable reaction functions to the central banks." Source
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