Adapt to survive

Economic uncertainty will undoubtedly shape the future of hedge funds. But while conditions look set to deteriorate, managers able to react to the changing environment will be presented with fresh opportunities

Over the next two to three years, the shape of the hedge fund industry is likely to be determined largely by the unfolding of macroeconomic events. While many believe conditions are likely to deteriorate, this can also lead to many new opportunities. Managers will be able to differentiate themselves by producing truly non-correlated returns, leading to rotation away from some of the recent strong performers - many of whom will prove too closely correlated with the underlying markets - while highlighting those able to adapt to change. From a hedge fund investor's perspective, established and...