David Smith, head of GAM Multi-Manager, said hedge funds in Europe cannot make any long-term bets without looking at the issue. “When European hedge funds say there are great stocks with great valuations and great buying opportunities, the truth is it doesn’t matter if you don’t have political resolution. Until the resolution of the European sovereign debt crisis it doesn’t matter what the valuation is.”
Hedge funds have a variety of strategies available to them when dealing with risk. Arnab Banerji, former adviser to Tony Blair and co-founder of Collabrium Capital, an emerging markets alternative specialist, says external advisers can be an important tool, whether they are large prime brokers that supply a background economist or independent political and intelligence firms like Exclusive Analysis and Control Risks Group.
Political risk consultants claim they are receiving greater numbers of calls from hedge funds. However, hedge fund managers themselves seem to be divided on the merits of these consultants, with one questioning whether the information he receives is already widely disseminated.
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