Alternative Investments: Hedge Funds Exercise Restraint

Returning risk appetite in combination with currently oversold equity and commodity markets could end up bringing a strong relief rally. This rather positive but still realistic scenario should put long short equity and emerging market funds (directional strategies) in the best position to outperform other strategies. Managed futures should perform the worst under this assumption, mainly because the deterioration in technical indicators recently forced mid- to long-term trend followers in particular to open net-short positions.