Hedge fund managers are scampering for safety as a huge credit rally evaporates investor confidence in the market. While some managers are selling bond issues, increasing short term investments or divesting interests in credit sensitive instruments, others though are left to hunker down and hope the storm passes soon
The storm in the market is the sudden thirty eight percent drop since June 2012 of the iTraxx index. This index measures the credit risk premium for a portfolio of high quality European based bonds. Other traditional funds are being kept though, as investors and managers keep a positive spin on the 2013 outlook after the European bank promised to do all it takes to support Euro Zone countries that are mired in debt.
Many are taking a sit on the fence approach, waiting how the market responds to events such as the Italian elections and other political activities. Until then, many hedge fund managers are keeping their fingers crossed.
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