Hedge Funds Adjust to Climate of Rising Interest Rates

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LONDON (HedgeWorld.com) - Ahead of the Federal Reserve's FOMC meeting on Thursday, June 29, hedge fund managers and analysts say that further rate rises are highly likely. The consensus is that rates will rise 25 basis points this week and a further 25 basis points later in the year - perhaps at the next Fed meeting scheduled for Aug. 8.

Only a tiny bearish minority hold out the possibility that the Fed will opt for a swinging 50 basis point rise to underline its anti-inflation credentials under its new chairman, Ben Bernanke. The broad view is that pockets of weakness are showing up in the United States economy and that the Fed's policy of engineering a slowdown is working.

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Hedge Funds Adjust to Climate of Rising Interest Rates

"Rising rates don't kill you like they do in a long-only fund," said one hedge fund manager. "The credit sector is the only one to get hit and they can hedge that. All a hedge fund wants is volatility. A bigger risk is the Fed does exactly wha...

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