Aksia: Hedge fund managers optimistic about markets but concerned about tapering

Hedge fund managers mostly are confident that financial markets globally will function adequately in 2014, but as a pack believe Federal Reserve Bank tapering poses the biggest risk next year.

“Respondents are not optimistic (about) the Fed's ability to manage stimulus withdrawal, with 75% saying they expect it to have a significant negative impact on markets,” according a report about the results of a survey of 198 hedge fund managers conducted by hedge fund consultant Aksia in October and November.

A majority of respondents, who in aggregate manage more than $1 trillion, predict that Fed tapering will begin in the first quarter of 2014, with 8% projecting a January start and 51% expecting a March start. The balance — about one-third of those surveyed — think tapering will begin in the last nine months of next year.

An overwhelming 90% of Aksia's hedge fund respondents are not fearful of rising interest rates: 46% think rising rates will be beneficial; 44% think a rate hike will have no impact; and just 10% expect negative impacts.

“While altogether a fairly cynical bunch, especially when it comes to newfangled hedge fund businesses, there is also a good degree of optimism about regulatory improvements, the functioning of the markets and longer-term economic prospects,” said Jim Vos, Aksia's CEO, in a news release accompanying the survey report.