Managers See Rising USD, Bottoming Oil Prices in 2015
BY will wainewright
A strengthening U.S. dollar, rebounding oil prices and higher volatility and dispersion among asset classes are among the forecasts from European hedge fund managers in Bloomberg Brief's annual outlook survey. A few managers supplied stock picks and identified market segments for opportunities, which are detailed on the subsequent page.
Michael Hintze
Eighty-six percent of global hedge fund managers expect the U.S. dollar to be the best performing currency this year, according to a survey by Aksia, a New York-based consultant. Michael Hintze, chief executive of CQS, and Michael Georgiou, chief investment officer of Idalion Capital, are among London-based managers who share this view. "I think the U.S. dollar will continue to appreciate against most major currencies due to the end of QE (quantitative easing) and the fact that it remains the global reserve currency," Hintze said in an e-mail.
Michael Georgiou
Georgiou said he expects the dollar "to continue its ascent in the first half of 2015 against most currencies." Idalion Capital, a global macro fund that launched in 2013 and returned 21 percent last year, is "especially bearish" on the British pound, which Georgiou said could fall to 1.3 versus the dollar on "downward inflation pressure" and political risks.
Georgiou said he anticipates "no end to the bear market in commodities," and Doug King, London-based chief investment officer of Merchant Commodity Fund said crude may drop below $40 a barrel in the next few months "unless we see real slowdown in production growth in the U.S. and Canada." While King said "there’s no point in trying to bottom fish as you are getting no help from the fundamental picture,” Pierre Andurand, whose London-based Andurand Capital made 38 percent last year after predicting Brent crude's
Pierre Andurand
slide, said oil prices will recover later this year. "Brent oil prices may well drop to as low as $50 a barrel in early 2015, before stabilizing between $60 and $70," he said.
Andy Hall, head of Astenbeck Capital Management, said crude oil could drop to $40 per barrel in the first half of this year but would recover in the second half, in a Jan. 2 letter obtained by Bloomberg.
Adam Glinsman
Macro-economically, the current environment "appears to be presenting a host of definable trends with significant dispersion across all the major asset classes," according to Adam Glinsman, managing partner at Cantab Capital Partners.
For Georgiou, the dispersion will be seen in emerging market currencies, where "powerful disinflationary forces" will pressure some central banks to ease policy. "We are especially bearish the Brazilian real and South African rand, whereas Turkey and India’s terms of trade can continue to improve with the decline in oil prices and these currencies should outperform," he said.
Deepak Gulati
Hintze also said 2015 will see "a return to dispersion" and that the year ahead "will be punctuated by greater volatility."
Volatility present "the best opportunities" in equity markets this year, according to Deepak Gulati, founder of Zug, Switzerland-based Argentiere Capital. "We like European volatility as well as many Asian vols such as Taiwan and Japan."