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Hedge funds to favour BRIC not PIIGS in 2010

posted Jan 15, 2010, 9:06 AM by Stacey Riggs
ZURICH, Jan 15 (Reuters) - The fast-growing BRIC group of economies will be back in favour in 2010 among emerging markets-focused hedge fund managers, who may shun European countries slammed by recession, an industry expert said. While strong growth is expected in Brazil, Russia, India and China, the European Commission expects the fiscal position of so-called PIIGS -- Portugal, Ireland, Italy, Greece and Spain -- to worsen even further in 2010.

"Concerns about absorption of new government bond issues will affect the intermediate-to-long sector of the yield curve in those countries," Lipper hedge fund research head Aureliano Gentilini told Reuters on Friday.

"Rating agencies will downgrade further the credit rating of PIIGS countries."

New Lipper research said India-focused investors will be the cornerstone of net sales in the Asian region in 2010, with hedge funds focused on emerging markets strategies accounting for a large portion of capital inflows.

China and Brazil are also expected to see strong inflows, although these may be less significant in Russia where political and governance issues remain worrying for asset managers.

The research says single manager hedge funds will see about $100 billion in new money in 2010 after two consecutive years of outflows. Average single fund returns of 10 percent will propel assets to $1.86 trillion by the end of the year, Lipper said.